Article on laid off brokers and other firms hiring them

[Texas Proud]

This was a link from a link that I saw...

Interesting article about brokers and how much in assets they need.. and how much in 'production' to keep employed...

Glad that nobody I know became a broker... from the article...

"Hire people who know people with money. This is the best way to build up assets quickly. The inexperienced broker approaches their friends and relatives with money who want to be supportive. Then, those people hit a ceiling if they can’t network beyond people they know."


The Hidden Dangers Of Hiring A Laid-Off Merrill Broker - RIABiz - - Forbes

 

[Onward]

Interesting reading. Thanks for posting.

 

[Nords]

I love these articles discussing the parts of the business that they really don't care to share with the customers. This one seems more focused on getting the most milk out of one cow rather than figuring out a way to get a little less milk out of a lot more cows. Maybe there's a reason that all those people with money are getting so hard to find.

According to a rating scale used by most management teams, a broker with 5 years LOS should have about $50 million of assets under management (AUM). They would be considered “First Quintile” and be treated very well. With fee-based business a focus these days we can figure this broker will be producing about $350k or more. This scale, known as the McLaughlin Scale, identifies a broker who produces about $10 million of AUM a year as rising star.

This seems to imply that a "rising star" broker is peeling $7000/year off every $1M portfolio... a 0.7% expense ratio. When the ER customer makes their 4% SWR, they're only keeping $33K for themselves.

 

[FinanceDude]

This seems to imply that a "rising star" broker is peeling $7000/year off every $1M portfolio... a 0.7% expense ratio. When the ER customer makes their 4% SWR, they're only keeping $33K for themselves.

At Merrill, those advisors aren't making much of a living. "Mother Merrill" keeps about 55% of their compensation to cover all the nice paintings and wood in the offices. There are MANY MORE independent FAs than the wirehouse advisors like Merrill. Stories about Merrill do not reflect the advisor business as a whole, Merrill is no longer the "big dog"..........

 

[LOL!]

John Rothchild published a book titled "A Fool and His Money" back in the 80s which described all of this. He described ways to make money investing and one way was to become a broker. In an amusing chapter he described being trained in the Cold Call. The trainees had to call trainees in the other room and sell them stocks.

Something similar goes on in Michael Lewis's Liars Poker.

And how many of your college acquaintances tried to sell you insurance the year you got out of college?

Same ol', same ol'.

 

[Sarah in SC]

This sounds just like real estate people--they have a potential pool of clients whose houses they list, and then when they run out of family and friends, they starve. That is an even rougher business, to my mind.

 

[Texas Proud]

At Merrill, those advisors aren't making much of a living. "Mother Merrill" keeps about 55% of their compensation to cover all the nice paintings and wood in the offices. There are MANY MORE independent FAs than the wirehouse advisors like Merrill. Stories about Merrill do not reflect the advisor business as a whole, Merrill is no longer the "big dog"..........

If Nords numbers are right... 45% of $250,000 is pretty good... and that seems to be a level where they will let you go...

 

[saluki9]

If Nords numbers are right... 45% of $250,000 is pretty good... and that seems to be a level where they will let you go...

A broker with $250K of GDC makes nowhere near 45%

More like 25% at ML

 

[Texas Proud]

A broker with $250K of GDC makes nowhere near 45%

More like 25% at ML

First... I should have said Finance Dude... not Nords for the percentage...

Still, 25% is in the $60K range.. which is not a bad salary..

Does the % go up if they bring in more fees? Or do they just get the same % of the fees they bring in


I remember way back when... back when I did tax returns and we had this very very rich guy... the tax partner mentioned that he had already retired 3 brokers... he received $10 million in dividends and had $10 million in cap gains the year I did his return... he also had 500 pages of stock sales in the return...

I had to be careful because we were using an outside service to calculate the return.. and it cost $4K to $5k EACH TIME I recalculated it...

 

[FinanceDude]

Still, 25% is in the $60K range.. which is not a bad salary..

Really, compared to what? Maybe everyone should be limited to making $60,000 a year?

Does the % go up if they bring in more fees? Or do they just get the same % of the fees they bring in

It's based on gross commissions, the more they bring in, the more they are paid. brand new Merrill Lynch advisors have to get $18 million in assets under management in their first two years or they are fired.

 

[harley]

Really, compared to what? Maybe everyone should be limited to making $60,000 a year?

Man, you are incredibly defensive! Yes, $60K is a decent salary, higher than most people make, at least starting out. If it doesn't sound like much to you, that might be an indication of why people here are so down on FAs and the value they deliver. You might want to put these FA threads on ignore. I think I'm going to.

 

[Texas Proud]

Really, compared to what? Maybe everyone should be limited to making $60,000 a year?



It's based on gross commissions, the more they bring in, the more they are paid. brand new Merrill Lynch advisors have to get $18 million in assets under management in their first two years or they are fired.

Who said to limit the salary... you are reading things I did not write...

"Still, 25% is in the $60K range.. which is not a bad salary.."

Where does it say this is a limit I said it is not a 'bad' salary... many people live on less...

And if you take a look at information on the web... heck, it is the mid career salary level for a number of university grads... here is a link by university...

College Graduate Salary Statistics by Location

Soooo, it is not bad compared to the vast majority of people working out there....

 

[saluki9]

Who said to limit the salary... you are reading things I did not write...

"Still, 25% is in the $60K range.. which is not a bad salary.."


Soooo, it is not bad compared to the vast majority of people working out there....

Let's put it this way...

$60K is not enough money to make it worth going through the amount of work you would have to do to build that book at Merrill.

 

[Texas Proud]

Let's put it this way...

$60K is not enough money to make it worth going through the amount of work you would have to do to build that book at Merrill.

I would assume you are right... I never wanted to be a broker and am glad I did not go that direction...

Still, $60K is not a horrible salary.. there are people who probably work a lot harder than the guy at Merrill who make that or less...

 

[FinanceDude]

Man, you are incredibly defensive! Yes, $60K is a decent salary, higher than most people make, at least starting out.

It represents a lack of understanding about the business. It would be like me making the assertion that engineers make too much, or attorneys make to much, or doctors make too much, etc.

There is a LOT more risk in building a business than most think. The rewards should include more money if you work that hard...........

If it doesn't sound like much to you, that might be an indication of why people here are so down on FAs and the value they deliver. You might want to put these FA threads on ignore. I think I'm going to.

I believe freedom of speech allows me to respond to erroneous information on this forum, at least until the FCC makes it illegal..........

People on here for the most part don't think FAs provide any value at all, and that's fine. I am not trying to change anyone's mind, nor can I.......

 

[Texas Proud]

It represents a lack of understanding about the business. It would be like me making the assertion that engineers make too much, or attorneys make to much, or doctors make too much, etc.

There is a LOT more risk in building a business than most think. The rewards should include more money if you work that hard...........



I believe freedom of speech allows me to respond to erroneous information on this forum, at least until the FCC makes it illegal..........

People on here for the most part don't think FAs provide any value at all, and that's fine. I am not trying to change anyone's mind, nor can I.......

But you responded to my post.... and I did not have any erroneous information...

I still stand by my statement... $60K is not bad... I did not say it was 'to much'... (go back and read my post and your response... ) sure, lots of people can and do make more... I do not have a problem with that... if you make $250K or more... great..

 

[clifp]

But you responded to my post.... and I did not have any erroneous information...

I still stand by my statement... $60K is not bad... I did not say it was 'to much'... (go back and read my post and your response... ) sure, lots of people can and do make more... I do not have a problem with that... if you make $250K or more... great..

I agree FD I think you are being a wee bit defensive here. My friends Amerprise financial planner has no college degree, no certification other than diplomas that Amerprise passes out and doesn't appear to work much more than 40 hours a week. I think her knowledge level is about on par with most poorly performed ML Brokers. I am hard pressed to figure out why she deserves more than $60K a year. She's convinced my friend that the 9% he earned last year in his taxable account and 12% in deferred is good so clearly she has more skills than I give her credit for.

 

[chinaco]

Gotta wonder about the reason for low production... not competent for the task or unwilling to #*$^ (insert 4 letter word) customers.


I suppose the 4 letter word could be "help".... whadaya think?

 

[FinanceDude]

I agree FD I think you are being a wee bit defensive here. My friends Amerprise financial planner has no college degree, no certification other than diplomas that Amerprise passes out and doesn't appear to work much more than 40 hours a week. I think her knowledge level is about on par with most poorly performed ML Brokers. I am hard pressed to figure out why she deserves more than $60K a year. She's convinced my friend that the 9% he earned last year in his taxable account and 12% in deferred is good so clearly she has more skills than I give her credit for.

Interesting, the firms I have worked for require a college degree. A Series 7 license, while not the most ardurous of tests, has only a 50% pass rate. Most Ameriprise advisors are required to get CFP's, which has a low pass rate also. Ask Sarah in SC how "easy" that test is..........

If we as a group were allowed to pay folks on what we THINK they deserve, many people's pay would be slashed........ A lot of folks I come into contact with I think are way overpaid, like my dentist..........

Contrary to popular belief on here, is is not easy to start with nothing and build up a business. It took me 8 years of hard work to build mine, and I took a 75% paycut from my previous career to do so. How many folks are willing to make that sacrifice with a young family?

 

[FinanceDude]

Gotta wonder about the reason for low production... not competent for the task or unwilling to #*$^ (insert 4 letter word) customers.

Not willing to work hard enough to make the grade. Most FAs don't get into the business to screw people, believe it or not!

 

[jIMOh]

This sounds just like real estate people--they have a potential pool of clients whose houses they list, and then when they run out of family and friends, they starve. That is an even rougher business, to my mind.

In my series 7 training course, there were 5 of us (at least 3 of us passed already).

Next door was a real estate class. There were 40-60 people in that class.

The number of stocks to buy is infinite. The number of houses to buy is very finite. Supply/Demand takes over and the result is...

 

[Sconie]

Thanks for sharing----interesting informatiom.