Nick Murray Business Plan Question..

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runner999's picture
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Joined: 2008-05-06

As some of you know, I am going to be starting at a wirehouse in the next few months.  I will be completely knew to the industry.  Almost everyone I have spoken with has told me to read Nick Murray's book The New Financial Advisor.  So that is exactly what I did and I have to say it is a GREAT book that has me excited about getting started.
But I wanted to ask you about the business plan that he recommends.  He says that the business plan should be to get 250 accounts of an average of 400k.  He also states that you shouldn't take any account below 250k so that it is possible to keep that average at 400k.  This would lead to a 100 million book of business and an income of approximately 500k a year.
 
His point is that if you don't "settle" for less you will eventually get those 250 accounts as long as you keep prospecting.  He says what is not impossible is inevitable and that if you keep prospecting day after day that you will get those 250 accounts.  It is inevitable as long as you keep at it.  If you take smaller accounts then they are taking up space on your 250 seat "Ark."
 
I personally really like this idea because I am not going to be financially strapped at all.  My wife makes enough to support us for many years and she is very supportive of this move for me.  Therefore, I can "take my time" and try to build my book of business "the right way." 
 
My question though is how practical is Murray's advice for a newbie in a wirehouse setting?  Is a wirehouse BOM really going to allow you as a new FA to start being picky from day one in who you accept as a client? 
 
I just really like this idea of building my business the right way from day one, but I am not sure how feasible that idea is in an environment where production is so essential early on.
 

snaggletooth's picture
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Joined: 2007-07-13

I am a huge fan of Nick Murray and really like that book.  The wirehouses really want you to get the $250k+ households, but the important thing is to hit your goals.  Although your manager has some discretion, your goals are the bottom line.
 
When you first start, it would be my advice to take what you can get in the beginning.  A $10,000 account won't do much for you at all.  But that is at least one person who trusts you.  You will gain confidence and have the potential to get referrals. 
 
I think it was Joe Girardi or whatever his name is, who was the "Greatest Car Salesman of All Time", who said that the average person has 250 people in attendance at both their wedding and funeral.  (Seems a bit high, but I'm pretty sure that's what he wrote).  Anyways, people know people, have family members that inherit things, retire, or whatever.  You get the point.
 
Also, I remember a story about a guy in my old office that was broker of the day.  There was a guy that walked in with $10,000.  The guy didn't want to take it, so he let another guy in the office meet with the walk-in.  Turns out the guy wanted to invest $10,000 to build trust.  After about a year, the guy brought over $10,000,000.  You just never know.
 
I would say don't go out of your way to find small accounts.  Prospect the big ones.  If a small one finds you, take it, service it, and ask for referrals.

runner999's picture
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Joined: 2008-05-06

thanks snaggletooth,

Your point of view is always appreciated. You make a great point on the referrals.

troll's picture
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Joined: 2004-11-29

Hey runner - you must be chomping at the bit already.
Plan on opening a lot of accounts - period. At least for the first year. For the reasons that Snags mentioned  - referrals, you never know, and practice. Also because in the wirehouse, for better or worse, you need to show a lot of activity. If you show you are opening new households, you wont have to worry if you are not quite hitting your numbers the first few quarters.
One thing you need to be aware of, when you open a hh, where you are going, if its not $200k, they will be charged $100 (or $50, i dont recall) basic account fee, unless its an IRA which gets charged $50. That can be a nuisance.
But the short answer is, open a lot of accounts. If they dont turn out useful, u can always put them in a split number with a rookie a few years from now.

runner999's picture
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Joined: 2008-05-06

I absolutely see where both of you are coming from in your advice to simply look at opening accounts. 
But it is funny how everyone, including my future BOM, has told me to read Nick Murray and to follow his advice, yet much of his advice is contrary to what happens in the "real" world.  I have already mentioned one way in which his advice differs.
 
He also has a very perceptive view on prospecting that differs greatly from the "real" world.  He believes that burnout and turnover is caused by forcing new FAs to prospect more and faster than they can stomach in the early days.  He uses that analogy of a marathon runner and states that if you want to become a successful marathoner, you don't put in your longest runs on day one.  Why? Because you simply can't take it.
 
Rejection is a powerful psychological force and it brings down many a FA trainee. He argues that FAs should slowly build up their ability to prospect at the intense pace that wirehouses require.  That psychologically you need this training to get to your maximum potential.
 
Since my academic background is in psychology and human performance, I really like his ideas.  I think they make sense. 
 
I know it would limit some people because they need the income immediately or they will not make it.  But if it isn't about income early on, I really think his ideas have merit.
 
But since I want to play by the wirehouse rules, I know I will have to start on day one of production with something similar to the "500 day war" as posted by The Judge.  I know that is what is expected.  But again, I think that might be part of the problem with the burnout rate in the industry. 
 
It is funny though that The Judge's post is entitled the 500 Day "War."  Even warriors work up to the ability to be great warriors.   

Morphius's picture
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Joined: 2007-07-21

Nothing wrong with Nick's plan of 250 accounts at $400K for a book with AUM of $100 MM and income of $500K - as a long term target, but it is NOT a plan.  Especially if you are in a wirehouse.  A target is great to help you focus, but it isn't always realistic.  The problem is the reality for a new advisor in a wirehouse setting is about 95+% of the time you will be fired for failure to meet your numbers long before you come anywhere close to  achieving that "plan."  Especially if you also aim to build your business predominantly on fees rather than commissions.Here's the real question: how exactly are you going to quickly find and land as clients those 250 households with an average of $400K?   As BondGuy has often wisely stated here, this business is simple, but it isn't easy.  It may sound simple to target fewer, larger clients, but it isn't easy actually doing so.  Some firms are more patient than others, but almost none would be patient enough to watch you turn away prospective business because of minimums when you you need every client you can get.  Whether Nick says it clearly or not - it's been a while since I read his book - that plan is much more relevant to an established FA than a new FA with no book.  Nick is one of my favorite industry writers to read, and should be read by everyone in the industry, and his approach can certainly work for some, but planning to building a book from scratch like that puts the odds dramatically against you.  It may work in the long run, but only if you manage to survive until then - and in a wirehouse it matters little if you are content to make little to nothing while living off your wife's income; the wirehouse expects certain minimums right from the beginning from you to cover their costs or you're history.I hate to be negative, but if what you believed to be true turned out not to be true, how soon would you want to know about it?

runner999's picture
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Joined: 2008-05-06

Morphius,
 
I understand that your post is right on when it comes to the reality.  And as I said in an earlier post, I will play by the wirehouse rules because I know that is the reality. 
 
But I will say since I just read his book that he is not talking about experienced FAs.  In fact, that is his whole point.  That you should START in the business using his plan.  Because if you start that way, then you will build your book the "right way" the first time. 
 
But as you said, Nick's idealogy and reality don't line up.  I wonder if he realizes this fact?
 
I do think it is unfortunate though that wirehouses don't have more patience and do a better job of hiring in the first place.  You are right in that they should expect production to cover their costs of training you.  But in the current model they also are requiring you to cover the costs of the 9 out of 10 other people that didn't make it.  Why not have more patience and have less turnover and lower training costs? 
 
Hey, I am not even in the industry yet, so I know that I don't understand 1/100th of what you guys know.  It is just my thoughts that I am putting down on "paper."  But I realize my thoughts are limited to a very elementary knowledge of the wirehouse model.

troll's picture
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Joined: 2004-11-29

"Serve the masses, eat with the classes.
 
Serve the classes... and you go belly up!"

anonymous's picture
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Joined: 2005-09-29

runner999, what you say is correct, but it's simply not the way of the wirehouse.   If you are going to a wirehouse, you will have to do whatever it takes to survive because you'll have no chance to thrive if you don't first survive.

runner999's picture
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Joined: 2008-05-06

Thanks for all the replies.  After reading a little more in Murray's book, I noticed something that is important to add to this discussion.
 
Murray believes that a new advisor should be able to get to 100 million AUM mark using his 250 client formula in four to five years.  He says specifically that it should take four years if you run and five years if you walk.
 
Obviously, even the strictest of wirehouse managers would be fine with a new advisor limiting themselves to 250k and above accounts if they were going to bring in 100 million in four or five years. 
 
I guess the disconnect is that it seems from reading your posts, that brining in 100 million in AUM in that amount of time would be extremely difficult, especially if you are restrictive in who you take on as clients. 

Morphius's picture
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Joined: 2007-07-21

runner999 wrote:Thanks for all the replies.  After reading a little more in Murray's book, I noticed something that is important to add to this discussion.
 
Murray believes that a new advisor should be able to get to 100 million AUM mark using his 250 client formula in four to five years.  He says specifically that it should take four years if you run and five years if you walk.
 
Obviously, even the strictest of wirehouse managers would be fine with a new advisor limiting themselves to 250k and above accounts if they were going to bring in 100 million in four or five years. 
 
I guess the disconnect is that it seems from reading your posts, that brining in 100 million in AUM in that amount of time would be extremely difficult, especially if you are restrictive in who you take on as clients.  Um, yeah.  Regardless of what Nick says, bringing in 100 MM in 4 or 5 years would be great, but it is also very difficult, and not often accomplished.  Most FAs would be thrilled to hit 100 MM after 10 years.  That is kind of the equivalent of telling a bunch of teenagers that if they work hard enough they'll make it to the pros and get a multi-million dollar contract.  Some make it, but the odds are enormously against you.Therein lies the rub: do you want to base your plan and your future on something that probably less than 1% achieve, or something a little more realistic?

now_indy's picture
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Joined: 2006-07-28

I love Nick Murray, but I don't think he's started as a financial advisor in today's environment.  Even bringing in 100 Mil in less than 10 years (starting from scratch) would be fairly impressive.  Even with market growth, you would need to bring in roughly $750,000 EVERY month on average. That's not easy.
 
If you are looking for a system, and you have $750 to see if you like it, I would recommend Bill Bachrach's Mastery Series 1.  For the money, you get CDs, DVDs, and binder with a lot of info on his system, and at least four coaching calls to help you implement the system. If you like it, and it works for you, you would get more involved (trips to San Diego, more materials to digest, etc.).
 
http://www.baivbfp.com/investments.html

abovocom's picture
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Joined: 2011-07-20

I'm just starting production and read Nick Murray's books too. I was so shocked at his belief that we could reach a 100mm in 3 years (as of his 2001 book) that I emailed him to see of he still believed it. He does!

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