Goldman Sachs, Alex Brown, Northern Trust ,CS, etc

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Don Draper's picture
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Joined: 2009-01-27

how does the ultra high net worth end of the biz work?  how do brokers build there business' at these places?  pretty sure it isn't cold calling.

Borker Boy's picture
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I was wondering the same thing. Does Goldman actually hire brokers like Merrill, Morgan, etc., who build a book from scratch?
 
I've always thought of them as being primarily I-Banking specialists and teams that focus on institutional investors.

san fran broker's picture
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Generally the setup is similar to a wirehouse arrangement, but the branch manager will steer more reassignments to rookies and you have lots of syndicate. They generally don't write checks to recruit. Also, they only really hire guys that know how to network and get business. The emphasis on hiring is on your existing network (business school, high (prep) school, etc) and sales skills.They also have syndicate, expense accounts and great events to invite clients ("would you like to join us with Steve Forbes at Davos this year?") They also had hedge funds and ARSs...But there still is cold calling - the difference is that the recipient of the calls hasn't already heard from your firm three times this morning and they are ususally pretty good cold callers, too.

DodgerDraftpick's picture
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I would also add that at those firms most hires are older, with MBA's, and take a salary as opposed to the traditional grid.  Also because of the heavy emphasis on teams there is a lot less moving of individuals because the client relationships are built on larger teams.  Therefore to move the entire team needs to be on the same wavelength.  But it does happen a huge SB team went to CS last year I believe.

Vin Diesel's picture
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Goldman primarly hires Ivy League grads with MBA's. Alex Brown will hire Reps from other firms/Wires doing $750Kmin consistantly for at least 5years. There are exceptions, a fomer collegue went to AB and he was only doing $400,000, but he had only been a rep for 3years and his girlfriend worked there. 
 
 

CDO Squared's picture
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Joined: 2009-01-20

is northern trust in that league?

Don Draper's picture
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Joined: 2009-01-27

CDO Squared wrote:is northern trust in that league?maybe not.

MinimumVariance's picture
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Joined: 2008-08-20

I remember there was this guy at GS that left  for ML (poor basdtard) and he brought a $1Billion book with him...thats with a B. GS min acct is $10MM.

NewRep73's picture
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Joined: 2009-02-21

In ultra-high net-worth (account size minimums are $5 million, but average more around $15 - $20 million) ... JPM, MS, CS, UBS, GS, and formerly LEH (now Barclay's) ... their wealth managers are almost exclusively MBA grads from Top 20 ranked programs.  The only exceptions are generally analysts who worked for a team at those firms and got promoted by that team.  That rarely happens and those analysts are almost always from Ivy League type schools. 
The previous post about getting lots of syndicate is not correct.  That maybe was the case during the tech boom, but it has not been that way in the last 8 years.  There is too much demand for the firm to be able to give really barely anything to their private clients.  Only the ridiculously wealthy private clients can get small slices of any syndicate, and that is only if they or their team of advisors throw their weight around.
 
The platforms are made up of:  cash management, fixed income (munis extremely critical for wealth investors for tax reasons), equities, REITs, private real estate, private equity, hedge funds, currency speculation strategies, master limited partnerships, etc ... the platforms are very robust and the research and asset allocation teams are made up of PhDs from top universities. 
 
The expense account comment ... again, not accurate.  Most wealth managers can spend around $15,000 / year on T&E, and they use that to travel all over the United States because their clients are often spread out geographically.  They do not fly clients to events in Davos.  That's simply false.  They do not even fly their clients to the corporate offices in New York.  The clients pay for all that.  Remember, the clients are exceptionally wealthy and exceptionally well connected.  Clients may get invited to a nice dinner, or a skybox, or a theater event, or a speaker event if it is in their town ... but never ever are they flown overseas for jet-setting trips.  That's just a fabrication from someone who has not worked in the industry.
 
All those firms will buy books of business.  When I've seen teams shop their books, I've heard they've received offers from all the firms, except Goldman, who seems to think they are above any bidding war for a book.  I've heard their sales pitch is essentially, "we are Goldman, think about how much more you could grow that book with Goldman on your card" ... most teams shopping their books basically rule out Goldman for that reason.
 
Northern Trust is completely different.  They don't buy books, and their assets tend to be very sticky because they have lots of clients who are conservative and have generational ties to Northern.  The same can be said for SunTrust in the southeast.
 
Bernstein is a capable competitor in the ultra-high net-worth, also hires similar people.  There are also a lot of consulting firms like Callan, as well as other botique firms who operate in that space.  The super ultra-high net worth investors with assets in excess of $50 million liquid generally have their own family offices that run things like a foundation with RFP's and the like.
 
The platform is nothing like a wirehouse.  There are no mutual funds being sold, only separate account money management.  The variety and access is far far greater than any wirehouse with 10,000 brokers.  Big firms like MS and UBS have different types of financial advisors, and they are completely separated physically and run like separate entities with completely different platforms and resources. 
 
They do cold call, quite a bit.  A beginning broker, even with a Harvard MBA, will find him or herself making 25 - 50 cold calls every day.  1 out of 15 calls may actually yield the actual prospect on the phone.  Their gatekeepers are very well trained and they are extremely busy people.  All these ultra-HNW companies have internal nationwide prospect management systems that ensure only one person from that firm is allowed to call on the prospect at a time.  They definitely network with enablers (lawyers, bankers, accountants) in order to get introductions. 
 
Alex Brown generally is marketing to lower level clients, and rarely comes up in competition with those firms.  However, Northern Trust and SunTrust and investment consultants are very viable and tough competitors.

Don Draper's picture
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Joined: 2009-01-27

SunTrust, really?

CDO Squared's picture
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Joined: 2009-01-20

NewRep73 wrote:
The platforms are made up of:  cash management, fixed income (munis extremely critical for wealth investors for tax reasons), equities, REITs, private real estate, private equity, hedge funds, currency speculation strategies, master limited partnerships, etc ... the platforms are very robust and the research and asset allocation teams are made up of PhDs from top universities. 
 
 
our industry is so full of crap.    we took down the free world with all our BS buzz word witch doctor 
 
"the platforms are very robust and the research and asset allocation teams are made up of PhDs from top universities."
 
stfu    translation?   
 
we use buz words and witch hazel to make fees.   these "robust" MF plarforms got you madoff, CDO's, CDO squared, SIV's,CMO's and a bit of Stanford's CDs
 
we suck
 
STFU with all your BS
 
 
  

Bodysurf's picture
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Joined: 2008-08-02

How's the Harvard endowment doing?Fortunately I've got all my money invested with a boutique outfit made up of PhD's, rocket scientists, and Nobel Prize laureates.  It's called Long-Term Capital Management, but they're so specialized and selective about whom they accept as clients, you guys probably won't be able to get in.I might even be able to find a statement around here somewhere . . . . . . . . hmmmm.  It's been awhile . . . . . .

CDO Squared's picture
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Bodysurf wrote: How's the Harvard endowment doing?Fortunately I've got all my money invested with a boutique outfit made up of PhD's, rocket scientists, and Nobel Prize laureates.  It's called Long-Term Capital Management, but they're so specialized and selective about whom they accept as clients, you guys probably won't be able to get in.I might even be able to find a statement around here somewhere . . . . . . . . hmmmm.  It's been awhile . . . . . .

haha another great example....

robust platform    stfu

Bodysurf's picture
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Joined: 2008-08-02

I love your World Savings avatar, btw.I wonder--did Wachovia touch anything in the last 10 years that didn't turn out to be a total disaster?  Was there an institution on planet earth who was in the same zip code where they were putting CDO's together that hasn't been annihilated?Maybe that's what happens when you get PhD's in aeronautical engineering to design your products, instead of guys who know a thing or two about history and behavioral economics.

FormerMD's picture
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Joined: 2009-02-23

I am a former MD at ML. I handle the top recruits in the US at firms like these. Please feel free to call with questions. 415.956.9990 Dan

Don Draper's picture
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Joined: 2009-01-27

FormerMD wrote:I am a former MD at ML. I handle the top recruits in the US at firms like these. Please feel free to call with questions. 415.956.9990 Dan
Dan,  if you have some insight, feel free to post it.

doug1's picture
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Joined: 2009-02-25

You are a complet moron. Were you the kid that sat in the front of the class with your hand up the whole time? Do you work for Sun Trust? Who in the world would put them in the same league as Goldman and JPM's high net worth divisions. Anybody with either a good book OR serious sales skills can get a job anywhere on wall street. Regarding expense accts, every firm will pay to fly somebody to the home office if they have enough money. If the firm says no and you have the ability to generate significant fees you'd be a fool not to put them on a plane. Let me know the next time you are giving a CE class at the local community college so I can make sure to fly down and benefit from your vast knowledge about the industry.

CDO Squared's picture
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Joined: 2009-01-20

Bodysurf wrote: I love your World Savings avatar, btw.I wonder--did Wachovia touch anything in the last 10 years that didn't turn out to be a total disaster?  Was there an institution on planet earth who was in the same zip code where they were putting CDO's together that hasn't been annihilated?Maybe that's what happens when you get PhD's in aeronautical engineering to design your products, instead of guys who know a thing or two about history and behavioral economics.

actually, WB would have been fine EXPECT for Ken Thompson buying of GWF and the 135 billion of Oakland Ca loans in 2006.

their in house loan portfolio was pretty decent (south east)

WS had GWF a STRONG SELL when thompson bought it.

probably top 5 all time dumb business moves.

sad

FormerMD's picture
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Joined: 2009-02-23

I formed on of the premier wealth management search boutiques in the US.Based on my roles over 17 years in the industry I am connected at the highest levels at all wirehouse, regional and independent firms. If you are considering moving I can offer sage advice. Please send me a message on this board and we can connect via phone.

san fran broker's picture
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NewRep73. I feel compelled to respond. I am actually quite well informed on this subject - at least in my neighborhood. I'll be specific; My facts are based on late stage recruiting interviews at DBAB, CSFB, GS, LEH in my area 2-3 years ago, when I was still essentially a rookie. As I recall, GS was interviewing everybody at the time (brokers I knew just couldn't keep it to themselves). I interviewed the branch managers in my area and ended the process relatively early on. I got the meetings by calling the branch managers and enjoying the benefits of being able to aggressively cold call without any fear of reprisal or screwing up the lead. They weren't really willing to write me a check and only GS's offices were nicer than mine, so I didn't decide to move, but figured at that time I would eventually go RIA or be a big fish in small pond with a regional. I don't think GS would have wanted me anyway; they didn't seem to care at all when I terminated the process. The other firms essentially behaved like they did when I interviewed at ML or MS or whatever and acted like they were selling the firm to me. CSFB seemed like a wire and the rest seemed like an investment bank.

At all of the firms, the older advisors reminded me of well-established high producers at my wirehouse. The marked contrast was in the younger producers. Most were more attractive, personable, and impressive than my peers. (There were some real freaks in my training class). But, despite their good skin and confidence, the seemed completely at a loss in regards to sales. A few were sharks, but most talked endlessly about how they were helping mine some senior producer's book. There was no concept of specialization and financial planning was seen as something irrelevant to the profession. Except for estate planning - then they all had expert knowledge of whatever was the trust du jour (in this case FLP/GRATs).

They seemed to all think they were institutional salespeople / t&e attorneys. All were on teams (as I was expected to join), but it seemed to be as close as any of the teams I saw at the wires (not too close). After much wrangling on the question of why they were recruiting - it became clear that in ALL firms, the recruits that had come into the firm over the last few years were underperforming. The managers saw them as lazy and unwilling to accept rejection through cold calling. They were looking to recruit guys that were a bit scrappier, I guess.

Asset size: As I recall, this was mainly BS as far as the managers told me (ex GS). CSFB wouldn't pay on less than $100k (unless it was managed - hahaha) There was some kind of ticket charge on smaller tickets. DBAB was all about gross and trading revenues. They talked about managed money like it was the wave of the future, which came off as very 'out of it' to me at the time. Lots of product crap in the discussions, but everyone did seem to own their book. Only Goldman seemed to have a real minimum account size of $2 million and they said that you should only be talking to people to whom that was a fairly small sum. In retrospect, I probably screwed it up when I expressed dismay at that minimum. They wanted you to get to $50 million after 2 years or something or you weren't working out. Can you imagine destroying your career because you didn't make a level of assets well above survivability in the profession?

Production levels at LEH, DBAB and CSFB were at the same level as my branch office and were heavily IBD product dependent (each in different ways). In most cases, the younger advisors were worse off than the guys where I was coming from from an annuitized revenue standpoint - they were all doing business with hedge funds - basically selling them their syndicate allocation in exchange for more kinda phoney business. The reverse was true for anyone who had been in the business for a while - they were all in the $1mm range and seemed healthy. I often got the impression that the numbers may have been exaggerated. In my conversations about the industry with them - all of the managers expressed serious respect for ML, which was pushing into the $700k average production range at the time (as I recall).

MBA Grads: My experience at most of the firms was that there were a lot of guys without MBAs. Everyone younger seemed to be from a sort of second tier school (no criticism here - I don't have an MBA). It was all U Texas, Yale Business, Kellogg, Northwestern, but not too much Harvard or Stanford except, again, at GS.. As I recall, the branch managers at GS and CSFB had elite MBAs.

Syndicate: All the firms stated that there was some kind of "guaranteed allocation to retail". I was told at CSFB that I would be given ~$150k of gross from syndicate a year, but that the payout was 20% or something. At LEH I was told that the issue was who was the client - same at GS. All firms told me that I would be able to get 1500 shares of syndicate on almost any deal (I, too, pimped myself to a hedge fund at the time). The attitude (I was told) at all of the firms was that it was an important tool in building your business, but that they didn't want you to become dependent on it. Managers seemed to have total discretion on allocations.

Product Mix: I found that every producer seemed to be doing their own thing. My business model of Rep-as-PM was looked at as valuable by every manager.

Expense accounts: $15k is a big expense account to a small town boy like myself! I never got an expense account that was anything like that at my wire. Yes, that's what I was told - although I was also told that I could get extra money if needed.

My reference to Davos was actually made up and you're right - it isn't really reflective of brokerages, but rather trust companies and private banks. But as to whether it's inappropriate or inaccurate - you're obviously wrong. Lavish entertaining is one of the primary tools of trust companies and private banks for biz dev. Of course they pay. People with $60 million can't afford a jet! This isn't any special knowledge - anyone who works at a trust company or even a wirehouse knows that. These days, anyone who reads a newspaper knows that. (I guess you don't.) Look at the recent Northern Trust event that got them into trouble- those people were all flown in on jets or first class and put up in the cabanas at the Beverly Wilshire. Do you think that the clients couldn't afford the gucci handbags that are getting so much press now? (http://www.tmz.com/2009/02/24/northern-trust-bank-bailout/)

Even my wirehouse flew HNW prospects to NY and put them up in a fancy hotel. (As I recall, the branch picked up part of the tab). Plenty of rich people are cheap, but everyone likes free stuff. The point of those events isn't that these people can't afford it - it's the thrill of not having to be the one to pay (for once) and getting your ego fed.

I think that the brokerage firms (LEH and CSFB) don't really do those events (as much) because the relationship is with the broker. At a private bank the client is usually diffused across multiple relationships - by design. In a brokerage model you are a complete moron if you want your branch manager and other senior executives of the company to get friendly with your clients - your book is your fortune. I always turned down invitations that my branch manager wanted with my best clients and never invited them to any of the hotel and speaker events. ("My clients work all the time..") Besides - they sucked. That's a big advantage for the trusts and private banks- Northern Trust rented out the House of Blues and got Cheryl Crow.

I have, however, seen UHNW brokers organize expensive travel events on their own and out of their own pocket. I've seen international travel financed by the broker. I knew one producer who moved through most of the wires and the ib firms (was at GS at one point, went to a hedge fund in the end), who rented an enormous house in the hamptons every year and ran his business from it - inviting clients and their friends to stay - holding court and having lavish parties every night. (Doesn't strike me as the image I would want to convey to my clients - but he knows something - he makes a hell of a lot more than I ever will - esp with all those checks every 7 years.)

Asset allocation teams: Wow. Are you really in the business? ALL of the firms have impressive people on those teams (ok, maybe not Stifel or something, but every major consumer bank is going to have enough Harvard MBA/PhD types to fill out some meaningless board that meets through gotomeeting for 30 mins a quarter.) Doesn't much matter anyway now, does it? Everyone can see how much CSFB and GS asset management sucks by looking at the mutual funds. The fact that you think that's even relevant suggests that you, in fact, have limited industry (let alone UHNW) experience. My experience also suggested that the brokers I met at all these firms worked to separate their clients from their firms as much as any wire retail broker I knew did.

Buying Books: I don't know. I wasn't big enough to assume a check. GS had a base salary. The rest offered a guaranteed draw. The basis of their offers was better administrative support (my observation, not theirs), syndicate, "culture" and, as you stated, cachet. No loan to have to wait for vesting, but also no real money upfront. Do the math; it probably won't make sense if you have strong relationships and recurring revenue. This is why million dollar producers don't go to these firms - not because the firms don't want them.

AlexBrown: I agree that DBAB seemed like a lower-end (of the higher end) firm to me, but it was really only GS that struck me as being different from the brokerages. Still, I recall thinking that the production averages (I think that the math came out to $1.3mm/head) seemed low. Some of the branch offices seems worn and shabby.

As far as the trusts and private banks are concerned, I think that you can't really make a comparison. The business models are very different. From the advisor standpoint - the relationships just aren't that sticky - there are a million reasons why, but in the end I really think that those jobs attract VERY different people from brokers. Whatever the reasons, the clients tend to associate with the firm, not the advisor. They aren't - to use a cliche- entrepreneurs. The Bernstein model seems like a hybrid, but you're not seen as a money manager and you're positioned as a relationship manager. Their business model seems ridiculously rigid (they want to tell you how you stand in the prospect's reception area?), as does their compensation structure - which I understand doesn't allow the advisor to annuitize their business. (No trails past 3 years or something?) What's the point in that? The advantage of this job is that (at least generally), the longer you work - the less you work. It seems like a private banker job to me, only you have to prospect. Isn't that what failed brokers do?

NewRep73 wrote: In ultra-high net-worth (account size minimums are $5 million, but average more around $15 - $20 million) ... JPM, MS, CS, UBS, GS, and formerly LEH (now Barclay's) ... their wealth managers are almost exclusively MBA grads from Top 20 ranked programs.  The only exceptions are generally analysts who worked for a team at those firms and got promoted by that team.  That rarely happens and those analysts are almost always from Ivy League type schools. 
The previous post about getting lots of syndicate is not correct.  That maybe was the case during the tech boom, but it has not been that way in the last 8 years.  There is too much demand for the firm to be able to give really barely anything to their private clients.  Only the ridiculously wealthy private clients can get small slices of any syndicate, and that is only if they or their team of advisors throw their weight around.
 
The platforms are made up of:  cash management, fixed income (munis extremely critical for wealth investors for tax reasons), equities, REITs, private real estate, private equity, hedge funds, currency speculation strategies, master limited partnerships, etc ... the platforms are very robust and the research and asset allocation teams are made up of PhDs from top universities. 
 
The expense account comment ... again, not accurate.  Most wealth managers can spend around $15,000 / year on T&E, and they use that to travel all over the United States because their clients are often spread out geographically.  They do not fly clients to events in Davos.  That's simply false.  They do not even fly their clients to the corporate offices in New York.  The clients pay for all that.  Remember, the clients are exceptionally wealthy and exceptionally well connected.  Clients may get invited to a nice dinner, or a skybox, or a theater event, or a speaker event if it is in their town ... but never ever are they flown overseas for jet-setting trips.  That's just a fabrication from someone who has not worked in the industry.
 
All those firms will buy books of business.  When I've seen teams shop their books, I've heard they've received offers from all the firms, except Goldman, who seems to think they are above any bidding war for a book.  I've heard their sales pitch is essentially, "we are Goldman, think about how much more you could grow that book with Goldman on your card" ... most teams shopping their books basically rule out Goldman for that reason.
 
Northern Trust is completely different.  They don't buy books, and their assets tend to be very sticky because they have lots of clients who are conservative and have generational ties to Northern.  The same can be said for SunTrust in the southeast.
 
Bernstein is a capable competitor in the ultra-high net-worth, also hires similar people.  There are also a lot of consulting firms like Callan, as well as other botique firms who operate in that space.  The super ultra-high net worth investors with assets in excess of $50 million liquid generally have their own family offices that run things like a foundation with RFP's and the like.
 
The platform is nothing like a wirehouse.  There are no mutual funds being sold, only separate account money management.  The variety and access is far far greater than any wirehouse with 10,000 brokers.  Big firms like MS and UBS have different types of financial advisors, and they are completely separated physically and run like separate entities with completely different platforms and resources. 
 
They do cold call, quite a bit.  A beginning broker, even with a Harvard MBA, will find him or herself making 25 - 50 cold calls every day.  1 out of 15 calls may actually yield the actual prospect on the phone.  Their gatekeepers are very well trained and they are extremely busy people.  All these ultra-HNW companies have internal nationwide prospect management systems that ensure only one person from that firm is allowed to call on the prospect at a time.  They definitely network with enablers (lawyers, bankers, accountants) in order to get introductions. 
 
Alex Brown generally is marketing to lower level clients, and rarely comes up in competition with those firms.  However, Northern Trust and SunTrust and investment consultants are very viable and tough competitors. didhttp://www.tmz.com/2009/02/24/northern-trust-bank-bailout/

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