My broker sez

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buyandhold's picture
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Joined: 2008-09-23

Just talked to a big city broker and he said some interesting things:1. 'The retail end of this business has been wholesaled.2. This was a great business for 35 years. The past five years it's been shiite.3. Everybody in my office is doing fee based. I'm the only one running my own stuff. (But) I don't see the fee model as sustainable. You're paying 1.5 to the advisor, 1.5 for the funds.4. They just want you to gather assets now. Go out and pound the streets and bring in money. Problem is you can do that for three years, then you're going to burn out.5. Everything has been discounted.6. Twenty years ago, I was making 200k, my manager was making 200k and Joe Torre was making 200k. Now I'm making 200k, my manager is making a million and Joe Torre is making 10 million. You need to be in management. 7. When I started you could cold call. People picked up the phone and wanted to talk to you. Not anymore.8. You will not make it pounding the streets for Edward Jones. Look at wholesaling. Or go send your application to the FBI. The last one I didn't want to hear but it was a fun conversation.

bspears's picture
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Joined: 2006-11-08

If you ask the long time vets at EDJ, they will tell you they (starting in the 80's) hit it right.  Many had stated if they had to do it today...it would be VERY difficult for them to survive.  Payouts are lower...competition is everywhere and the client is less loyal.  With technology, almost every firm has access to products, Insurance and banking.
A friend of mine mused that he saw the same thing happen in Real Estate brokering.  He made a killing in the 80's-early 90's, but now every stay at home mom has her license and to compete you have to reduce your fees to win the business. 

 
This was one of many reasons I chose to move to the Indy platform.  If I was going to do 250k at Jones with a 38% payout, I could move to Indy, do the same and keep 70%.  None of the firms today have a niche that gives them an advantage over any other firm.  Fee base platforms, alternative investments, stocks, bonds, insurance...we all have it.

norway401's picture
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Joined: 2007-10-16

BSpears/Buyand Hold....the other significant issue is the " Shot Gun " hiring process. Hire ten and hopefully one or maybe two will survive. The firms talk about change but the reality is that in many cases they are still back 20 years ago in their hiring and systems within the firm/s. I am not referencing technology but the corporate culture. The young person that survives today is in my humble opinion more versed in product, technology then their fellow FAs of twenty years ago. I would suggest that the " old guys " probably would wash oput in todays world.

buyandhold's picture
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Joined: 2008-09-23

I love young people today. But I don't think they've been brought up to go out and work 60 hours a week building a business. One, they've got too many other priorities and interests. They want to spend time with their families. They want to have balance.  Two, they've been promised in school and by their parents that the world will treat them fairly. I just don't think they'll take any bs from their employer. They see through things real fast. .... Man, I love generalizing!

norway401's picture
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Joined: 2007-10-16

BuyandHold....right on the generalizing and you are correct on the 50-60 hour work week , a rare thing today. It is a generation thing , I could be there father and I can tell you they are in later to the office than me and leave a lot earlier. Oh , and a Saturday appointment....errr they don't do that
One thing I do admire is to your point they do not take BS from the employer. The phrase " I am outta here " is not uncommon.

lambda's picture
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Joined: 2005-07-20

From a Gen X point of view (which is relatively "old" by today's standards), I would have gladly stayed and worked my ass off at my previous employer (before I got into this business).  However, there was no loyalty and the way I see it, if your not loyal to me, then there is no reason to work hard or even stick around much longer.  You have kids today that are lazy and then you have the kids who are hungry and just don't put up with corporate politics and the insecure people that are a part of it.  That's why I love this biz, if you make your numbers and someone tries to give you shit, then you can literally tell them to go f* themselves.

norway401's picture
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Joined: 2007-10-16

Lambda....loyalty to employee or employer is regretfully a thing that also has disappeared from the workplace. That being said the person that is hungry does what they need to do to survive and prosper. Not quaint or Norman Rockwell ....just the way it is.

deekay's picture
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Joined: 2007-05-15

buyandhold wrote:Just talked to a big city broker and he said some interesting things:1. 'The retail end of this business has been wholesaled.2. This was a great business for 35 years. The past five years it's been shiite.3. Everybody in my office is doing fee based. I'm the only one running my own stuff. (But) I don't see the fee model as sustainable. You're paying 1.5 to the advisor, 1.5 for the funds.4. They just want you to gather assets now. Go out and pound the streets and bring in money. Problem is you can do that for three years, then you're going to burn out.5. Everything has been discounted.6. Twenty years ago, I was making 200k, my manager was making 200k and Joe Torre was making 200k. Now I'm making 200k, my manager is making a million and Joe Torre is making 10 million. You need to be in management. 7. When I started you could cold call. People picked up the phone and wanted to talk to you. Not anymore.8. You will not make it pounding the streets for Edward Jones. Look at wholesaling. Or go send your application to the FBI. The last one I didn't want to hear but it was a fun conversation.
 
Your broker is a piker.  He hasn't made any more than he did 20 years ago? 
 
Then, he makes the comment that "the fee based model isn't sustainable because...1.5 to the rep, 1.5 to the fund", follows it up with "everything's discounted", and you think this guy/gal has an ounce of credibility?
 
I imagine it's tougher now than 20 years go, I'll admit.  The DNC list and the internet make prospects a lot more cynical.  But to forego the retail channel all together?  Ridiculous.

buyandhold's picture
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Joined: 2008-09-23

Deekay, what I think what he meant was that as soon as firms figure a way to sell a fee-based mutual fund account directly to their clients, or give the FA even less, they will. And as as soon as the EJ client figures out that he could go to Fidelity and buy a Target fund and get the same thing as an EJ advisory account without the annual fee, he's liable to do that.  Certainly if I was a client I would ask the broker, 'So you're getting 1.35 per year to present this to me once, and then meet with me once or twice a year and talk about the grandkids.'Seems to me a client would want more -- well, stock brokering.

Spaceman Spiff's picture
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Joined: 2006-08-08

Then you'd be thinking wrong.  That grandparent conversation is more important to them than any conversation about why Thermo Fisher is at a great price right now.  The ones who will have that meeting with us once or twice a year want it more for the handholding and personal contact than the portfolio construction. 
 
Oh, BTW, EDJ can't sell anything to it's clients.  They send out all kinds of crap to my clients to get them to call me, but none of them ever do.  I sell stuff to my clients.  I tell them what to do with their money.  I have those grandkid conversations.  Not EDJ.  Your big city broker friend is a doofus.  And if you believe him, so are you.    

newrepd's picture
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Joined: 2008-07-21

I think this retail subject comes up every decade.

<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />In the 70s it was the way they changed commission structure, "it will never be the same"
In the 80s it was with advances in technology and computers "it will never be the same"
In the 90s it was with all the discount brokerages coming up and giving people $7 fees "it will never be the same"
 
Now its DNC list and a combination of all above and "it will never be the same"
Every decade people/brokers/advisors have had to adapt. I do not think it will be any different.
What "big city" is your broker from?
 
 

buyandhold's picture
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Joined: 2008-09-23

Retail has been wholesaled.I take that to mean that the client who used to pay for full service now goes to Schwab or some other online outfit and pays less. The trend will continue. You see that in every industry.Maybe financial services become Wal-Mart-ized somedayI take it to mean that the guys in the back office are making the big money now. You see it at EJ where big money producers leave the field to become GPs.Spiff, just trying to figure out what's really going on after three years on the hamster wheel. I think I'm going to have to find a niche, a clientele, a point of view, some kind of skill that people will pay 1 percent a year for. ... Right now I don't think it's advisory accounts. Or handholding.

stokwiz's picture
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Joined: 2004-12-04

What a bunch of BS.
 
You get out of this business what you put into it. If you   want to succeed, you have to be creative and smart enough to evolve with the business. I've been in the biz 20 years, and am making 1000% more than I did 20 years ago.
 
I see too many brokers sitting on their ass complaining how bad everything is while the smart brokers are out there talking to people and killing it.
 
A year ago talking to new prospects was more difficult, because everyone thought they were in good shape. Now everyone is scared and open to new ideas.
 
Management is where it's at? You have to be joking.
 
Stok

Hey Kool-Aid's picture
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Joined: 2008-03-30

The beautiful thing that happened several years ago was the Tech Bubble Burst.  Investors were getting way cocky...thinking that this was easy and anyone can make big money "day trading"...then, low and behold the bubble burst and millions upon millions of do it yourselfer's dollars went flying out the window.  I think for the most part that that put the FA back in the "Professional" category.  My clients and prospects, mostly realize that they cannot do it themselves properly.  They know that they could but do not have the time nor the desire to learn about it...that's why they have me!!

Morphius's picture
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Joined: 2007-07-21

buyandhold wrote:Retail has been wholesaled.I take that to mean that the client who used to pay for full service now goes to Schwab or some other online outfit and pays less. The trend will continue. You see that in every industry.Maybe financial services become Wal-Mart-ized somedayThe only problem with this recurring prediction is that it ignores a little thing called reality.The online discount brokers do not offer the same thing that full service brokerages do.  Information does not equal knowledge.  If it did, librarians would be rich and with the advent of the internet, we'd all be both geniuses and rich.  What's missing from the online model?  Us.  You.  me.  A real live person who has some experience, takes the time to understand them and lead them along the path the should go,  and can help and reassure them.  Does everyone want or need that type of service?   No, just like not everyone needs to hire a plumber to fix a leaky pipe.  But enough do to make that dork's premise fatally flawed.  And every conclusion that flows from this flawed premise is likewise flawed.  If you accept this patent nonsense, you might as well get into another line of work, because you're doomed from the start.Grab your helmet and get in the game, and quit listening to that toxic nimrod who is just looking for excuses.

buyandhold's picture
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Joined: 2008-09-23

:)Doofus. Piker. Toxic nimrod.Don't call him that. (You can call me that, I get worse on the doorstep.)The guy is collecting Social Security, playing tennis every day and making 200k in his spare time. I though his opinions were thought provoking.

Sportsfreakbob's picture
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Joined: 2008-08-24

SORRY FOR THE CAPS - I'M TRAVELING AND LAZY TONIGHT
buyandhold wrote:Just talked to a big city broker and he said some interesting things:1. 'The retail end of this business has been wholesaled.
WHAT THE HELL ARE YOU TALKING ABOUT???2. This was a great business for 35 years. The past five years it's been shiite.
THE BIG CITY BROKER HAS BEEN SLEEPING THE LAST 5 YEARS3. Everybody in my office is doing fee based. I'm the only one running my own stuff. (But) I don't see the fee model as sustainable. You're paying 1.5 to the advisor, 1.5 for the funds.
THE GUY IS NOT ONLY A PIKER, HE IS DEAD MAN WALKING4. They just want you to gather assets now. Go out and pound the streets and bring in money. Problem is you can do that for three years, then you're going to burn out.
OH, OK, GO FIND CLIENTS TO PAY YOU A 300 DOLLAR COMMISSION TO BUY 500 SHARES OF GE!!! GOOD LUCK5. Everything has been discounted
NOT EVERYTHING - ONLY THINGS WITH NO VALUE6. Twenty years ago, I was making 200k, my manager was making 200k and Joe Torre was making 200k. Now I'm making 200k, my manager is making a million and Joe Torre is making 10 million. You need to be in management.
NEED TO BE IN MANAGEMENT? IN OUR BUSINESS? NOW I KNOW THE BIG CITY BROKER IS SMOKING CRACK. MAYBE IN PROFESSIONAL SPORTS, NOT IN OUR BUSINESS - TRUST ME - I KNOW7. When I started you could cold call. People picked up the phone and wanted to talk to you. Not anymore.
HE'S CALLING THE WRONG PEOPLE8. You will not make it pounding the streets for Edward Jones. Look at wholesaling. Or go send your application to the FBI.
I DONT KNOW JACKSHIT ABOUT EJ - SO I WONT COMMENT ON THIS ONE.The last one I didn't want to hear but it was a fun conversation.
YOU CALL THAT A FUN CONVERSATION ? YOU MUST BE SUICIDAL

fastcar's picture
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Joined: 2007-02-20

doesn't the dismantling of ML, BS, Goldman, MS...all the investment banks give you an indicate that an FA should  polish up their resume???  get a clue.

Morphius's picture
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Joined: 2007-07-21

fastcar wrote:doesn't the dismantling of ML, BS, Goldman, MS...all the investment banks give you an indicate that an FA should  polish up their resume???  get a clue.I have no idea which post you are even responding to, but regardless let me ask you this: what in your opinion is the significance of investment banking's demise on financial advisors that should lead them all to polish up their resumes? 

smokescreen agent's picture
Joined: 2008-08-19

.

Sportsfreakbob's picture
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Joined: 2008-08-24

Morphius wrote:
fastcar wrote:doesn't the dismantling of ML, BS, Goldman, MS...all the investment banks give you an indicate that an FA should  polish up their resume???  get a clue.I have no idea which post you are even responding to, but regardless let me ask you this: what in your opinion is the significance of investment banking's demise on financial advisors that should lead them all to polish up their resumes?  I dont know which post he is referring to either. But the operative word is "all" . Thats where his statement strays from reality. The lower end FA;s and the commission based FA;s (most of them) and the ones that lived off of syndicate, pfds, closed ends, clearly need to go find something else to do. The FA;s who are top half to 60% of their firm and take a consultative approach (by this i DO NOT necessarily mean managed money alone, but a holistic approach to their clients needs) will not only not need to "polish up their resume", they will thrivein the new world that is coming.Bottom line - PEOPLE STILL NEED PROFESSIONAL, UNBIASED ADVICE - MORE THAN EVER.

greyhairedbrker's picture
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Joined: 2008-07-28

buyandhold wrote:Seems to me a client would want more -- well, stock brokering.
 

The age-old talking points from the world traveler with a fondness for pictures of dogs in sweaters….

Sportsfreakbob's picture
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Joined: 2008-08-24

Smokescreen Agent - You bring up some good points However, i think the Advisor - the FA who truly takes an advisory approach, and loves his work, will more than survive. People need advice. Yes the younger generation knows how to access information - but do they know what to do with it? Do they know how to position themselves to prevent emotional decisions? Do they know how to figure out what they really need, based on their assumptions about lifespan, inflation, asset class returns? Regarding your comment about fees on top of MF expenses, etc. and auto rebalancing - i agree to a large extent. Thats why i prefer an Advisory Relationship on a fee basis - separately managed accounts - with ME managing the money. I get to educate the client, run the money according to the expectations i;ve set up with the client, and i can be tactical in tough times, and talk to the client when appropriate about decisions I;VE made. And more and more, it seems to me ETF's make sense in MOST (not all) situations for most of the portfolio, and sometimes individual stocks. Using these instead of MF;s with  1% asset based fee for accts of $1MM or more, makes sense as long as you are bringing value.

newrepd's picture
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Joined: 2008-07-21

iceco1d wrote:Smokescreen,
 
No offense, but it's pretty clear that's the reason you aren't in the business anymore.  Your struggle to find value in what an "advisor" does is the problem. 
 
Others will tell you - I'm the first one to jump in the fray regarding costs, etc.  That is such a small part of what an advisor does. 
 
I disagree that the younger generation knows more about investments than the older generations...I have plenty of 20 & 30 year old clients (that is my age range, and I have plenty of peers in this demographic), they are just as grateful for quality advice (and equally clueless on their own) as the older generations.
 
But even if they were strikingly sharp regarding asset allocation funds from T. Rowe Price and Vanguard...where should they put them?  401K?  Should they go with the traditional or ROTH account?  If times get tough, should they take a loan from their 401k/403b?  What are the risks?  What are the consequences?  When they get closer to retirement, what will they add to their Asset Allocation & Target Date fund portfolios to help them cope with bear markets?  Will they buy annuities?  Will they buy negatively correlated securities?  Both?  Neither?  How much of each?  When should they take Social Security?  Will they even HAVE Social Security?  What are their insurance needs?  What if they get hurt and cannot work?  How much money will they need to put in those Asset Allocation funds each month to have enough money to retire at age 60?  Once they retire, how much money can they take out each year for their paycheck?  Do they know how to improve their credit score?  How about create, and stick to, a household budget?  Will they have the fortitude to stay invested during times like these?  Will they bail to CDs tomorrow?  Do they know they can start a Spousal IRA for their homemaker spouse?  Do they know about age 50 catch-up contribution limits?  Do they know about ROTH conversions? 
 
Should I keep going?  I think we provide a heck of a lot of value for our 1% fee. 
 
VER VERY VERY WELL PUT...

Vin Diesel's picture
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Joined: 2007-04-18

 
the bottom line is there are too many brokers in the industry where margins are under severe pressure. 
 
i think we are entering an era with a few large banks will and a lot less reps. reps that survive will do very well.  indy reps could come out of this in a very strong position, but again there will be fewer of them

bspears's picture
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Joined: 2006-11-08

All I have to do is look around my town to concur with you on this thought process, Vin.  Read this interesting article on the Great Depression...
 
http://www.nytimes.com/2008/10/01/business/economy/01leonhardt.html?_r=1&hp&oref=slogin

B24's picture
B24
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Joined: 2008-07-08

iceco1d wrote:Smokescreen,
 
What are their insurance needs?  What if they get hurt and cannot work? 
 

 
AFLAC!

Morphius's picture
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Joined: 2007-07-21

Morphius wrote: fastcar wrote:doesn't the dismantling of ML, BS, Goldman, MS...all the investment banks give you an indicate that an FA should  polish up their resume???  get a clue.I have no idea which post you are even responding to, but regardless let me ask you this: what in your opinion is the significance of investment banking's demise on financial advisors that should lead them all to polish up their resumes? 
Since fastcar won't respond to my question, I'll clarify my point in asking.
 
You need to better understand the diffferent sectors within the financial services industry, fastcar.  Registered reps, or FAs in the more common parlance of this RR forum in which you offer your blinding insight, are not employees of investment banks.  They work for broker/dealers, which may be under common corporate ownership with an investment bank but brokerage firms are most certainly not investment banks.  Hence the notion that FAs should polish their resumes simply because investment banks have been "dismantled" is just nonsense. 
 
Moreover, the relevant information any potetnial new b/d would be interested in from an experienced FA is certainly NOT a resume.  It is their production details and a clean U 4. 
 
I'm not saying FAs at any of the firms you mention or anywhere shouldn't be preparing for a possible change of firm, but not for the reason you state.

B24's picture
B24
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Joined: 2008-07-08

Morph, good points. I think less experienced advisors don't quite get it. RReps are actually ASSETS of their firms (even if they can't be quantified on a balance sheet). B/D's are bought and sold purely on the level, consistency, and reliability of the income streams generated by their FA's. If anything, FA's should polish up their T-12 records to show to prospective new employers so they can talk about retention packages or moving-day checks. FA's are basically "mini-businesses", not unlike today's MLB baseball players, that come with track records and proof of bottom-line results.

fastcar's picture
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Joined: 2007-02-20

LOL...B24..the business model is dead..acceptance is the first step.

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