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Your confusng charging fees and seeing fees. I do not open small
accounts anymore (like our $125k example above) because they typically
require mutual funds. Do you use mutual funds with your
clients? Do you use annuities with your clients? If you do
your clients are paying trading fee’s, management fees and commissions,
they just don’t see it. You can pack my lunch all day long with
small accounts and I don’t care. I would submitt, however, that a
larger client that has a pile of mutual funds with a broker that “is
not running the broker meter” is virtually my entire pipeline. We
typically run our own portfolios and charge a fee. They see
it, some can deduct a portion of it, the perormance is good, and they
enjoy all of the benefits of a privately managed portfolio.
What is the profile of your team--gender, ages, education, experience, previous B/Ds, any specific expertise?
What do you figure makes you "better" than a mutual fund?
My team is 4 advisors, 2 assistants and 2 interns. We have been
in the business between 5 and 15 years. We have 2 CFP’s, 1 CFA,
and 1 CIMA. We all have Bachelors and 1 MBA. 2 Men and 2
women, the assistants are women and the interns vary. We have no
specific expertise, although we do some non-profit work.
We are not better than mutual funds, there are many really good mutual
funds that have performed far better than us. We just do a good
job of running the money for clients so they do not have to concern
themselves with it. We usually beat our benchmark by a few basis
points. Some of the benefits are that we customize the portfolios
so the clients’ likeness comes through. Perhaps there are sectors
or positions they favor or refuse to participate in, a characteristic
of many clients once they are asked. We run the portfolios in
tune with an investment policy they create with us. We are also able to
harvest losses, gift shares, all sorts of neat things traditional
managed accounts or mutual funds cannot accomplish.
We are not for everyone, and thats OK. Our typical client is
wealthy Boomers that are busy and sophisticated, but not real
interested in the details. Usually we manage in excess of $1
million per household but will go as low as $250k.
The reality is our new clients typically began investing with a broker
or on there own in mutual funds because that was what was best for them
at that time. Their brokers or discount firm failed to address
some of the items I mentioned above with them, and we do. We are
coming up on my favorite time of year…capital gain distribution
time. Our lowest performing strategy is up 6% YTD and we have a
net realized capital loss for tax purposes in that particular
one. Many mutual fund shareholders are flat or up but will get
the unsolicited capital gain. We get lots of referrals in the
fall because we market harvesting losses, and this year is especially
juicy due to the rough summer. We have it down cold and if we get
in front of someone we usually win. Our practice is planning
based and very very disciplined in terms of process.
1. It is not a good idea to refer to people who don't want to pay extortion as "cheap."
answer cheap is cheap. I want to be paid for my knowledge.
2. Twenty years in the business is meaningless since the business can be understood in about six months or a year.
answer: how can someone in 6 months know what it is like to experience:
market up and downs,
how people, clients react to this,
sector mania
bubbles
1987 crash
1990 gulf war
1993 bond market
early 1990's s&l crisis
ipo mania and how to trade them
how to understand and play research reports from corporate finance side. how to use research. how to do your own research
real estate partnerships
international investing
how to not buy the best performing mutual funds before you owned them
value investing
momentum investing
pink sheet stock/stock promoters
there are so many things that a one year broker has never seen or experienced. Would you prefer a new realtor, lawyer, mechanic, chef,doctor ect over someone who has been through it all
The fact that it is a business is true, but it's the only business I can think of that feels justified to take an ongoing fee for doing very little other than sitting down once or twice a year and suggesting things that are as close to common sense as it comes.
answer:I have a friend, who left me in 1997. he was in mutual funds. his IRA was about 100k. He left and went to a discounter, diversified his investments into several tech/net stocks and blew his account down to nothing. The funny thing is now he is making good money and he still will not do business with me. He bought an annuity in his IRA. If he knew the fees he would lose his mind. he did not see them or do his homework. Cheap is Cheap, Stupid is stupid. I will admit I was happy when he blew himself up
I think you're going to find more and more people who will consider the idea of ongoing fees to be repugnant.
Somebody said something to the effect of, "His portfolio was up 8% so my 1.5% was justified." My response is, no it's not because your 1.5% was close to 20% of his portfolio's increase--and that's on top of paying fund managers too.
It really is an obscene idea
Answer- your right some people will not pay fees and Others will
We write covered calls and buy puts. No shorting, no margin and no futures.
We use mutual funds or separate managers for Natural Resources, Real
Assets, Manged Futures, International, Emerging Markets, and High
Yield. We also use ETF’s for sector and other specific
opportunities (we made some good hay in Brazil).
You're not bright enough to know the difference between your and you're. You've ridden a bull market for twenty years and think you're something special.
One of these days the media will turn its bright lights on this disgusting trend and it will instantly die.
[quote=rightway]We write covered calls and buy puts. No shorting, no margin and no futures.
We use mutual funds or separate managers for Natural Resources, Real Assets, Manged Futures, International, Emerging Markets, and High Yield. We also use ETF's for sector and other specific opportunities (we made some good hay in Brazil).
[/quote]
Do you write calls and buy puts in the same accounts?
No. We have a specific covered call strategy we run all on its
own. We buy the stock, write the call and then give it up or roll
it up. Not my favorite strategy we run, but its works well in
sideways markets. We also write calls when clients have very
large positions and are not ready to sell, but would consider at a
higher price.
We buy puts just to protect positions. One of our strategies ends
up with equity concentration over time and I get nervous when we have a
position that has increased 6-7 times over. Our discipline tells
us to keep letting it run but I don’t want the thing to pull back then
have the sell discipline hit. So, I buy a put to protect it and
if it runs I am still in it…I hate stop losses.
Why not use margin with a put to protect the position since it’s so heavily leveraged?
Cannot do any margin…not allowed in the managed account platform due to the fact I have discretion.
[quote=rightway]Cannot do any margin...not allowed in the managed account platform due to the fact I have discretion. [/quote]
How long have you been registered?
Dear STBEgone
At least I have done something for 20 years. Leave the business, take your 1000 dollars rollover to etrade and buy an ETF.
[quote=rightway]I started in 1993. Began running my own portfolios in 2001 [/quote]
Will you be denied the right to use margin forever simply because you have discretion, or is it something that can change over time?
[quote=rightway]Not sure. I never really looked into it. I can see the value in it though. [/quote]
The way I look at it is if an equity is good enough to buy in a cash account it should be twice as good to buy more of it on margin, just use a put to control the risk.
I'm surprised that you're not given the leeway to do it if the client understands what you're doing.