So I have a potential offer to join a financial advising team. This is a WF, ML, MSSB type of team. The guy who runs the book is 65 years of age with about $300 million AUM (so he said) and looking to retire in the next few years. The only other members of his team are two females that are more admin type people. He wants to bring me in as a potential successor and I guess to eventually buy his book. I have read a number of articles on here on PWM, financial advising. I have spoken to people that say they love it - good money, own clients, work life balance and that type of thing. But most people tend to say that financial advising is a joke (used car salesman)and PWM is a highly paid joke compared to IB, PE, HF, etc. I am a Level III candidate with 5+ years of corporate finance experience (M&A as well as valuation) and have a decent network of people. This seems like a good opportunity, but I wanted to get your opinion before potentially accepting. Curious to hear from those who work at a WF, ML, MSSB and buying somebody’s book of clients.
I used to work on a team at one of the companies you mentioned in a support capacity (not admin work tho). It’s good money if your book is large enough and the work-life balance is excellent. However I thought the structure was too restrictive to run money on a discretionary basis which is, I assume, what you ultimately want to do be doing. Layers and layers approvals were needed to engage in “unconventional” strategies to the point it was too much of a hassle to deal with. Buying anything on the bank’s restricted list was also a pain in the a$$. The PMs I was working with in fact decided to leave and set up their own RIA due to extensive limitations on investing. Also very sales driven. Just my .02
What do you want to be doing in 5 years?
Jorgeam86 thanks for your reply. What constitutes a large enough book? I know that WF, ML, MSSB take a good chunk of either your commissions or fees for AUM (about 50% I heard). So, if I go with 1% or 100bps of AUM and take away 50 bps (to WF, ML, MSSB), is that a decent metric for potential income for the entire office?
commission varies with account size. For example, UHNW may pay 30-40bp. You’re right, your employer takes half. Your new buddy should disclose this; if he doesn’t, run.
Typically firms like Merill and Wells won’t even look at you unless you do about 250-300k in production. Those firms also typically charge more than 100bps; more like 150 and up depending on the platform and the asset level but you’ll typically clear around 35-50% of that. Buy the assets and then go independent where you can clear at 85-90%.
thommo77 Wrote: ------------------------------------------------------- > Jorgeam86 thanks for your reply. What constitutes > a large enough book? I know that WF, ML, MSSB take > a good chunk of either your commissions or fees > for AUM (about 50% I heard). So, if I go with 1% > or 100bps of AUM and take away 50 bps (to WF, ML, > MSSB), is that a decent metric for potential > income for the entire office? Sounds like you could be onto a good thing here…
what about RBC DR - i know guys who have jumped to them over the past decade for lower fees?
This business has very low loyalty. Its all about the money. What makes you think a lot of those investors wont jump ship as soon as he is gone?
iteracom Wrote: ------------------------------------------------------- > This business has very low loyalty. Its all about the money. What makes you think a lot of those investors wont jump ship as soon as he is gone? True, and I agree. Though in this case the advisor is retiring so that should help him out a little. Additionally, it’s a pretty painful process to switch institutions, so there is a certain timeframe over which he’ll have the chance to establish some credibility. Separately, client retention rates for advisors have dropped since the crisis and many firms are seeing drops of ~20% - this will also work to his advantage imo.
iteracom Wrote: ------------------------------------------------------- > This business has very low loyalty. Its all about > the money. What makes you think a lot of those > investors wont jump ship as soon as he is gone? This is true and a definite concern, however by bringing me in now I can start to build relationships with his existing client base and hopefully it will be a seamless transition once he decides to phase himself out. He is not retiring now. It seems like this business is all about trust and relationships. I am still not sold on the idea and I am meeting with him again to discuss specifics, but I appreciate all the input.
thommo77 Wrote: ------------------------------------------------------- > thommo: it totally depends on what your priorities are. I am currently in this succession program with a very large producer (top 5 in western Canada). Pros: After a couple of grinding years, you could be playing golf 2-3 months per year, have lots of time for your family, make good money, develop key connections, there’s never a dull moment - everyday is different. Finally - no cap to your earnings potential (there are producers in my office pocketing millions each year). risks: the clients could bolt once the advisor retires - this is normally a risk that is minimized via the program where the new incumbent works with the senior guy for 3 or so years, establishing relationship with the existing clients. It takes a certain personality type to excel in this role - if you are good with people, outgoing, don’t mind talking to strangers and good at listening, you could excel. If you are the introverted type, love to stick to your desk 8-10 hrs a day, and hate to tell people what your weekend plans are, stick to your current job. It’s true that the bigger shops’ payouts are tiered and the grid is built to motivate people to produce more, but a book of the size of $300 M would normally turn 70-85 bps on average which would equate to approx $1 m net for you assuming a grid of 50% payout. Now, that’s a decent change to look forward to in a few years. You’ll have to amortize your cost of purchasing that book at roughly 40 bps for around 5 years. Please note, that I’m using these figures from my own experience and I’m not sure what’s this guy turning on his book. The most important skill to have is relationship building. After a lot of research and thinking, I realized that this is the best career for me. I have done the corporate finance, credit, Oil & Gas, buy-side, this is the best job I’ve had. I have buddies in IB, ER, etc., so I know almost every finance program as a career option. No matter what you decide, remember, there is always a trade-off. And trust me, I get intellectually challenged in this job just as much as in any other job. For me the biggest reward is when your client thanks you for the great job you’re doing. By the way, opportunities like this are as rarely seen as the Hailey’s comet. I just got lucky! Hope this helps.
Iginla, this can be you one day http://montreal.ctv.ca/servlet/an/local/CTVNews/20060323/broker_prostitutevisit_060323?hub=CalgaryHome
^ haha, the only time I answer a booty call is when I’m in Vegas baby!!
Iginla2010 Wrote: ------------------------------------------------------- > > Pros: After a couple of grinding years, you could > be playing golf 2-3 months per year, have lots of > time for your family, make good money, develop key > connections, there’s never a dull moment - > everyday is different. Finally - no cap to your > earnings potential (there are producers in my > office pocketing millions each year). > > It takes a certain personality type to excel in > this role - if you are good with people, outgoing, > don’t mind talking to strangers and good at > listening, you could excel. Sounds like my type of gig. Is there a path to this sort of thing?
Muddahudda Wrote: ------------------------------------------------------- > Sounds like my type of gig. Is there a path to > this sort of thing? It’s not as cookie-cutter type as IB or ER or buy-side research. The only path is to network. You may want to call them and ask to go for a coffee. A good start would be to look up the local CFA society. Nowadays, a lot of Advisors are charterholders, but it’s still in it’s early years.
I want to become a broker before the age of 30.
Iginla2010 thanks for your post. Very helpful. I think the risk of the clients bolting is mitigated somewhat by bringing me in at this stage of the game where he will probably retire in the next 3 to 5 years or so. At least that is what I hope. How do I find out what the guy is turning on his book? Do I ask him and take his word for it or do I have to dig a little deeper. How would you approach this? Thanks for your insights. I agree with your points regarding skills required, personality, etc. I too have done the corporate finance thing for about 5+years…just looking at other options. Nothing definite as yet. What is the advantage of being at a wirehouse vs. taking your clients and going independent?
You should ask him directly how much of a turn on his book, there’s no reason for him to hide it. It’s a very reasonable question. You can take your clients independent when you are generating enough to support your SG&A expenses. Also, you take that step once you have a very solid relationship with your clients. Sometimes, a client would want to stick with the big shop - they like the fact that their money is at a shop that won’t disappear overnight. Relationship skill is key, although it’s not a very easy skill to have. Good luck!
My career path was that I joined a senior advisor (at a wirehouse like firm) about 5 years ago (was a LII candidate at the time, now CFA, CFP, and soon to be CAIA); we have since started our own RIA, of which I am an equity owner, and a senior advisor myself now. We manage about $150 million for 75 clients (and growing, we turn away more clients than we take though). My partner is the rainmaker, I’m the brainmaker. The firm brings in about $1 million/year. We have to pay for office space, staff, etc… but we each do pretty okay, he does more okay than I do in the $500 range take home. Work/life balance is great. If you’re serious about and have the qualities mentioned by Iginla, I’d consider it. I haven’t worked in the wirehouse environment but $300 million is a good sized book and the investment work (atleast on the independent side which you can always move to) are as in depth as you want it to be. I would demand to see the revenue, book, etc, everything you’d want to see if you were buying a business and then have a formal succession plan in writing.