How many of you manage your clients portfolios?

28 replies [Last post]
JimYoung's picture
Offline
Joined: 2007-08-05

Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).
What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!

troll's picture
Offline
Joined: 2004-11-29

The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.
 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.

Morphius's picture
Offline
Joined: 2007-07-21

JimYoung wrote:Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).
What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!What is it you are hoping to accomplish by creating your own portfolios and stock picks?  There is a world of difference between picking funds and third party money managers and essentially becoming a portfolio manager.  It's similar to the difference between a GP and a cardiologist: one is a generalist, the other a specialist in a narrow area.  If you truly want to be paid for managing portfolios on a discretionary basis (as opposed to pitching stock picks), you obviously need to approach this as you would pretty much any professional endeavor: first LEARN, then do.  What's the best way to learn?  While it can certainly involve schools and designations (such as the CFA), nothing beats actually working for those who have the experience and are willing to train you.  And you're not likely to find many opportunities for that in your current sales environment, where compliance concerns will (as Skippy alludes to) make that very difficult if not impossible.  If you want to catch salmon, fish where the salmon swim, and as it pertains to portfolio managers, you need to focus on asset management RIAs.Computer software may easily spit out Monte Carlos and even suggested stock picks, but you can't simply rely on technology to compensate for a lack of knowledge and experience.  Those are tools, and like any tools the results you get are more a function of the person using the tools than the tools themselves. There is no magic short cut to gaining knowledge and experience in any field.  Find someone who is good at what you want to do and learn from them.  But first be certain that is really what you want to do professionally, because you can't expect to be a decent portfolio manager without dedicating yourself to it.

babbling looney's picture
Offline
Joined: 2004-12-02

skippy wrote:The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.
 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.Are you saying that in your firm, if a client comes to you with a fist full of cash or transfers and existing portfolio over to you and is interested in buying some individual stocks, your firm will not let you do this?   Seriously?Send them on over to me please. 

troll's picture
Offline
Joined: 2004-11-29

babbling looney wrote: skippy wrote:The only way a FIRM would even consider allowing you to "pick stocks" would be to get the CFA designation.
 
It's the be-all-and-end-all, "Mack-Daddy" of all investment designations.
 
Have fun studying!  It'll take you a minimum of 3 years to complete.Are you saying that in your firm, if a client comes to you with a fist full of cash or transfers and existing portfolio over to you and is interested in buying some individual stocks, your firm will not let you do this?   Seriously?Send them on over to me please. 
 
If a client came to me with an ACAT of a bunch of stocks, I can take it.
 
If the client wants to buy some stocks, I can take their trade orders on an UNSOLICITED basis.
 
I can recommend liquidating stocks for the purposes of furthering their financial plan, or diversification purposes to put the proceeds into a mutual fund or other well-diversified investment product.  I cannot SOLICIT a sell for any other reason.
 
For being on that basis, I'd still be charging "full service" charges.  Yet, the client doesn't benefit from any firm research or professional advice regarding their individual stock holdings.
 
This is the way most B/Ds operate that don't have their own firm research department.
 
I'm okay with it because I consider myself a "financial strategist" or "Macro-Manager" for my clients.  I'm not someone to watch the market every second and manage portfolios myself.  I can't do it and I don't want to do it.  I'll let mutual fund and 3rd party managers do their job while I manage the client.

Morphius's picture
Offline
Joined: 2007-07-21

Skippy,I'm not sure your B/D's restrictions on stock transactions is representative of the norm.  That sounds very restrictive to me.  Perhaps that is more typical of the insurance or bank B/Ds, but I can't speak with any first hand experience about those.My experience at a wirehouse was you could pitch stock transactions all day long, but they are very reluctant to allow anyone to operate discretionary accounts - you must be closely vetted for that, and I'm sure a CFA or similar experience would be key, as would production (you always had more clout the higher your production).  But I think even those few discretionary accounts were impacted and largely weeded out following last year's vacating of the SEC B/D exemption rule.  I agree with you that it is not my goal to try and be a portfolio manager, but to be that restricted is overkill IMO - just another example of the compliance tail wagging the dog and managing for the lowest common denominator.

JimYoung's picture
Offline
Joined: 2007-08-05

Morphius wrote: JimYoung wrote:
Don't bash me for the newbie questions, but I wanted to learn how to create own portfolios and pick stocks. (I'm not an advisor, but I'm in the financial services sales industry where I use mutual funds and third party money managers).
What is the best way for me to learn? Any books? Computer software technology? Best way to learn how to run Monte Carlo simulations? Thanks!What is it you are hoping to accomplish by creating your own portfolios and stock picks?  There is a world of difference between picking funds and third party money managers and essentially becoming a portfolio manager.  It's similar to the difference between a GP and a cardiologist: one is a generalist, the other a specialist in a narrow area.  If you truly want to be paid for managing portfolios on a discretionary basis (as opposed to pitching stock picks), you obviously need to approach this as you would pretty much any professional endeavor: first LEARN, then do.  What's the best way to learn?  While it can certainly involve schools and designations (such as the CFA), nothing beats actually working for those who have the experience and are willing to train you.  And you're not likely to find many opportunities for that in your current sales environment, where compliance concerns will (as Skippy alludes to) make that very difficult if not impossible.  If you want to catch salmon, fish where the salmon swim, and as it pertains to portfolio managers, you need to focus on asset management RIAs.Computer software may easily spit out Monte Carlos and even suggested stock picks, but you can't simply rely on technology to compensate for a lack of knowledge and experience.  Those are tools, and like any tools the results you get are more a function of the person using the tools than the tools themselves. There is no magic short cut to gaining knowledge and experience in any field.  Find someone who is good at what you want to do and learn from them.  But first be certain that is really what you want to do professionally, because you can't expect to be a decent portfolio manager without dedicating yourself to it.
 
What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.

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

Morphius wrote:Skippy,I'm not sure your B/D's restrictions on stock transactions is representative of the norm.  That sounds very restrictive to me.  Perhaps that is more typical of the insurance or bank B/Ds, but I can't speak with any first hand experience about those.My experience at a wirehouse was you could pitch stock transactions all day long, but they are very reluctant to allow anyone to operate discretionary accounts - you must be closely vetted for that, and I'm sure a CFA or similar experience would be key, as would production (you always had more clout the higher your production).  But I think even those few discretionary accounts were impacted and largely weeded out following last year's vacating of the SEC B/D exemption rule.  I agree with you that it is not my goal to try and be a portfolio manager, but to be that restricted is overkill IMO - just another example of the compliance tail wagging the dog and managing for the lowest common denominator.
 
I know a couple S7 bank brokers that cannot solicit, but can accept trades.  It is abscially because they do not have analyst departments or receive any type of direction on individual stocks.  They can solicit funds and bonds (I think).

Morphius's picture
Offline
Joined: 2007-07-21

JimYoung wrote: What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.I think if you re-read my post that mentioned software you will realize I do not recommend any software for the purpose you mention, i.e "trying to learn how to create portfolios myself."  Moreover, the software readily available is designed more for the asset class level, NOT for picking individual securities, much less "which stocks are hot right now."  I can promise you this: pretty much any trading "software" or "system" offered for sale is not worth diddly - if it truly worked the developers would make far more money using it to trade than selling it.  Most importantly, I would never recommend someone "learning" with clients' money, and the software available does not negate the need to learn first.  It is a tool that can be used once you have some idea of how to build portfolios.  There is no software short cut to knowledge or competence.  Jim, doesn't your b/d offer you any help in recommending portfolios, especially containing funds?

JimYoung's picture
Offline
Joined: 2007-08-05

Morphius wrote: JimYoung wrote: What computer software program would you recommend? (preferably something easy to use as I am just starting out). The objective in trying to learn how to create portfolios myself is that when clients ask me why they would need me instead of just buying a mutual fund, I have an answer with substance other than "you need me for the hand-holding." Furthermore, if asked for my opinion of the market or which stocks are hot right now, I would like to be able to carry the conversation further.I think if you re-read my post that mentioned software you will realize I do not recommend any software for the purpose you mention, i.e "trying to learn how to create portfolios myself."  Moreover, the software readily available is designed more for the asset class level, NOT for picking individual securities, much less "which stocks are hot right now."  I can promise you this: pretty much any trading "software" or "system" offered for sale is not worth diddly - if it truly worked the developers would make far more money using it to trade than selling it.  Most importantly, I would never recommend someone "learning" with clients' money, and the software available does not negate the need to learn first.  It is a tool that can be used once you have some idea of how to build portfolios.  There is no software short cut to knowledge or competence.  Jim, doesn't your b/d offer you any help in recommending portfolios, especially containing funds?
 
I'm not yet a registered rep yet, but I am in the financial services sector of the industry. I should be diving in within 6 months-1 year, but it can't hurt learning as much as I can for the time being right? Since there's not any way I can experience this "hands-on" right now, what do you recommend?

noggin's picture
Offline
Joined: 2004-11-30

Start with a Benjamin Graham book or two. The Intelligent Investor and Security Analysis.

Gaddock's picture
Offline
Joined: 2007-02-23

Strange ...
I started with AGE a little over a year ago and could buy and sell stocks from day one. A CFA? yeah sure. That's the quickest way to starve out I've heard yet.

kujhawks300's picture
Offline
Joined: 2008-03-21

Jim,
 
You have some hard work cut out in front for you but with desire you can make it.
 
I recceommend readinga couple of books,,,,anything from Nick Murray.  Read it from cover to cover and practice that stuff in front of a mirror.
 
Learn to use some type of screening software and set up a screen of what you want t company to have for example, zero long term debt while growing the earnings etc.  Play with that for a while and you will improve.
 
While you are learning this learn a good mutual fund story like Franklin Founding fund Strategy.
 
This will get you on your way.

Gaddock's picture
Offline
Joined: 2007-02-23

As for picking stocks use your companies focus list, use the non producing CFA's work. That's their job. With AGE I primarily use the DSIP list, a dividend strategy. When I get an email saying one is falling off the list like ACAS I'll start writting 10%in the money calls and put in a stop in case it begins to really tank, to get rid of it. When one makes the list I'll sell a put out at 3 standard deviations, less than 45 days (time value degredation is your friend) and wait to see if we get it or not, if not write another put until we do.

Bodysurf's picture
Offline
Joined: 2008-08-02

All you need to manage your own clients' portfolios is a Series 65 or 66, with whatever additional training your firm assigns you.I manage about $20 million in portfolio management programs where I select the securities myself on an unsolicited basis.  In September I went to 80% cash--too late, unfortunately--but my accounts are down 21% on the year as opposed to down half.  In markets like this, I'm hard put to think of a reason why a client would be best served by throwing money into mutual funds, and hoping the managers there do the right thing.  Lot to be said for being able to press a button, and have all your clients out of stocks, or into them, in a matter of seconds.

Squash1's picture
Offline
Joined: 2008-11-19

Good luck predicting the market over the next 20 years for your clients(Seeing as you already failed this year).
 
 

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

Bodysurf wrote: All you need to manage your own clients' portfolios is a Series 65 or 66, with whatever additional training your firm assigns you.I manage about $20 million in portfolio management programs where I select the securities myself on an unsolicited basis.  In September I went to 80% cash--too late, unfortunately--but my accounts are down 21% on the year as opposed to down half.  In markets like this, I'm hard put to think of a reason why a client would be best served by throwing money into mutual funds, and hoping the managers there do the right thing.  Lot to be said for being able to press a button, and have all your clients out of stocks, or into them, in a matter of seconds.

This is where many FA's get REALLY confused. Most don't realize that fund managers may not LEGALLY be able to go to all cash, bonds, gold, whatever. Their prospectus may dictate they be 80% invested(or more or less), and invested within narrow parameters (i.e. small cap growth, or the stock must come from within a particular index, etc.). So when the shlt hits the fan, there's not much they can do. HOWEVER, this is where it's the FA's job to know when to reduce mutual fund holdings and go to cash in the overall portfolio. You CANNOT expect most fund managers to weather a storm against their fund prospectus objectives, since many are handcuffed by law.

This is why I like certain core funds such as global allocation funds (First Eagle Global, Blackrock, etc.). They have much more lattitude than many narrowly-focused funds.

Squash1's picture
Offline
Joined: 2008-11-19

Founding Fund Strategy is terrible.. 3 funds available individually, then packaged together for a higher fee.  Not to mention 2 of the funds are poor and the third one can't be categorized because it has everything...

radernation-1's picture
Offline
Joined: 2005-06-07

As far as stockpicking goes I agree with the other guys regarding the various books, I would also recommend using some sort of stock newsletter to get some ideas and make them your own. I have used www.stocksatbottom.com since 2004 and have had some good success  depending on my clients goals, suitability ,etc.

Gaddock's picture
Offline
Joined: 2007-02-23

Again, does your firm not have some kind of focus list that they let you know when to buy hold and sell and why? That will be you best place to start. If you can get your head around buying yield and selling volitility using options you can really make things happen for your clients.

moneyguy's picture
Offline
Joined: 2008-11-21

How do you select securities yourself on an unsolicited basis?  Do you mean non-discretionary?  If you are recommending the securities, you are soliciting them. 

Wet_Blanket's picture
Offline
Joined: 2008-11-13

Gaddock wrote:As for picking stocks use your companies focus list, use the non producing CFA's work. That's their job. With AGE I primarily use the DSIP list, a dividend strategy. When I get an email saying one is falling off the list like ACAS I'll start writting 10%in the money calls and put in a stop in case it begins to really tank, to get rid of it. When one makes the list I'll sell a put out at 3 standard deviations, less than 45 days (time value degredation is your friend) and wait to see if we get it or not, if not write another put until we do.
 
I like you post, and have been doing something similar - however can you clarify the 3 standard deviations?  Do you mean three strike prices, or do you actually calculate this (the standard deviation)?

Gaddock's picture
Offline
Joined: 2007-02-23

Actually calc the deviations and delta on all trades

Indyone's picture
Offline
Joined: 2005-05-30

For the most part, I don't manage my own portfolios.  For me, it was as simple as realizing that I could either be good at building my book or be good at picking my own investments, but not both.  I do some limited stock-picking, but clients know up front that for most money, I select managers with good track records and let them make the buy-sell decisions.  At least with crappy markets like these, you can blame the manager (assuming they deserve it), fire them and maintain the relationship.  If you've done your own management and underperformed, what decision does the client have except to fire YOU?

Wet_Blanket's picture
Offline
Joined: 2008-11-13

Are you talking about SMAs or mutual funds?  I guess I just can't stand not being 'behind the wheel' on investing (ecspecially when the manager does not want to go to cash or does not use option strategies for either income or hedging).  But I'm not exactly recreating the wheel either - I use research.

Akkula's picture
Offline
Joined: 2008-02-17

Wet_Blanket wrote:Are you talking about SMAs or mutual funds?  I guess I just can't stand not being 'behind the wheel' on investing (ecspecially when the manager does not want to go to cash or does not use option strategies for either income or hedging).  But I'm not exactly recreating the wheel either - I use research.
 
Most SMAs that we offer don't have flexibility in making strategic asset allocation decisions based on factors in the market.  That is why I prefer to use some good long/short mutual funds that have the flexibility to short or go to cash as the economy dictates.  Mutal funds are far ahead of SMAs in this regard, I think.  In the next few years we will probably see more flexible arrangements in SMAs. 

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×