Broker for half decade with delima

Discussion in 'Professional Trading' started by LEAPup, Aug 30, 2008.

  1. LEAPup


    I've been reading through threads here, and have a question that I'll try to keep short. Well, hopefully short.

    I have a family member who works for a major wirehouse who got me interested in being a broker five years ago. I have a BA (not in finance, or economics. "Organizational Leadership and Development" with a minor in Psychology.)

    I'm 36 years old, have a family, and worked my way through College (later in life, graduating in 2001) I paid my way through working as a Police Officer, promoting to Sergeant before graduating. Yes, I know, everyone hates cops... I don't have that "cop attitude," and have been out of that business since 2001.

    Needless to say, I didn't go to Smith Barney and hang out to see what really gets done from day to day. I took it as I would be picking equities, building portfolios, and making people money. NOT being a salesperson. Sure, I watched Wall Street a few dozen:D times, and knew there was 'some' sales involved in earning trust so I could land "the big accounts" that I could trade for.

    What I did not know was the fact that those days of picking stocks for people, and making them money is long gone. Very long gone. You see, there's no money (commissions are 1/100th of what they once were) in picking stocks and making folks money. In fact, compliance frowns on it. People now have access to discount firms, and can do this WITHOUT me, all the while they paying $7/trade instead of the former $300-$700 per trade that USED to be the norm.

    So where is money now made for a guy with a Series 7 General Securities Rep license, 66 Registered Investment Advisor Rep license, and Life & Health licenses? Packaged products. Stuff like A share mutual funds, variable annuities, Limited Partnerships (for Accredited Clients), and managed money for a fee.

    The problem is the fact that I thought I was going to be picking those stocks, and managing their money, so they could make money and be at least somewhat happy with their PROFESSIONAL Broker. Not me selling them the same stuff they can get down the street at ABC wirehouse. Not me having to call people I don't know trying to sell them something that may or may not do well for them. I've always been more analytical than that, and done well in trading my own account in the past.

    I was shocked to find out that the mutual funds that I put them in usually don't beat the spx. I was shocked to find out that the money managers I put their money with were also sub-par. I was shocked to see how much they were paying in fees to hold a variable annuity that performed sub-par so they could get a guaranteed death benefit, or guaranteed withdrawl benefit while the firm got a big commission, and the insurance company, and wirehouse could get richER.

    This isn't what I wanted. I was told "stick with managed money, and you'll do fine." Well, the managed money is down over 500bps ytd (not bad I guess relative to the markets...), the mutual funds down 1000+bps ytd, and the variable annuities I don't even want to talk about.:(

    I have been monitoring the main money managers I use, and they blow my mind at the ignorant stuff they buy, and decide to continue to hold. More than half under the 200dma, for example and performing poorly. I put together a tactical asset allocation portfolio on paper, and am up 14.6% ytd.:confused: :( I continually outperform these "professionals," and I've only been licensed for 5 years, with a trading background of about 8 years pervious to becoming licensed.

    What I'm trying to say is I am analytical, and have more of a trading mindset. Not a "you need to gather assets" mindset, and send them a statement, and go to dinner with them once a quarter. That just isn't me. I'm at the point where I have people I can bring on as new Clients, but I don't get excited about talking to them, or "papering them," as I know what they'll get is sub-par. That leads to a problem of me not making money, but it's not about me. It's about them. I found out 5 years later that I'm on the wrong side of the business. Yes, I know, I should have figured this out earlier, but retail firms have a way of keeping "the carrot in front of the horse" indefinitely.

    I could get a portfolio I built through compliance, sure. However, I'd make about enough money to take my family to Wendy's for dinner with the commissions paid on that. That's where the packaged product B.S. comes into play.

    Variable Annuities pay on average 7%

    A share funds pay on average 5- 5.75% (unless they qualify for breakpoints making the commission less)

    Managed money is about 2% per year on the average account.

    And, last but not least, the Equity Indexed Annuity paying 9-10%:eek: That's right. A $200,000 rollover into one of these pays $18,000-$20,000.:eek: However, the interest earned is "linked" to the spx, meaning the insurance company has a way of screwing the Client out of the FULL gains of the spx. Things such as point-to-point crediting of interest, monthly averaging, etc., Basically a 15% year in the spx means they'll probably get less than half of that. Not to mention the MAJOR surrender charges involved, and caps on interest earned,:(

    I'm wanting out of being a retail Broker badly. I am wanting to trade for a living like I thought I was originally going to be. I just didn't know it was going to be like this, and that there are firms (major firms!!!) who push their Brokers to sell snake oil packaged products when they have guys who could do much better doing the right thing. For me, the right thing is working hard finding the right mix of equities, bonds, cash, etc., and getting paid for doing so. Sadly, those days are long gone.

    I know, Brokers bitch about the commissions being tiny for stock picking vs. selling money managers, funds, annuities, etc., due to the discount brokerages. I know if you want to make good $$ you have to sell this "stuff." But I just don't want to do it anymore, nor can I stomach the thought of putting poeple's hard earned money into sub-par crap just so the firm and me can get paid well. I'm just not a salesman. Other Brokers may say that I'm weak, or a "piker" for not being all happy about jumping on the phones to pitch the flavor of the month, but I cannot get excited about this kind of work.

    I get excited about trading.

    I get excited when I see guys trading on the floor of the NYSE, CME, etc.,

    I get excited about trading with other LIKE MINDED guys/gals trading, and making money. NOT selling sub-par junk.

    I'm a thinker. I'm analytical. I have a Son who is in the 5th grade, who can be within .50 cents of what the total bill will be at the grocery store when we got to the checkout using no calculator. And, that's with him adding in the State sales tax!!! But his Dad? A salesman... I'm not proud of me... I wanted something else, and what I'm currently doing is NOT it.

    I guess I'm asking for help, and advice. I'd LOVE to work on a trading floor. I'd love to be in that environment. Just don't know which way to turn.

    I'm far, far from rich. LOL! In fact, I don't sell the snake oil crap, so I don't get paid what my "peers" get paid. Plus I have a family.

    I konw there are probably several Brokers on here, so please don't take offense. There's always going to be a market for a Broker to sit down with a Client, see how much money they have, find out their risk profile, etc., and sell them something and make a nice commission in the process. It just isn't me though.

    Again, all the retail Brokers I know would say get a job at Walmart, or be a compliance officer, but that's not what I'm going to do. I really appreciate any advice you guys and gals here have as I don't know where else to turn.
  2. LEAPup


    Almost forgot, I don't have enough $$$ to daytrade my own account for a living. Yet... That isn't an option right now, as I have a family and need income that won't be blown out if I make ONE error in a trade.

    I'm a rather broke Broker.:( :p

    Btw, sorry for not keeping this short, but I wanted to lay all of my cards out on the table and get advice from those of you who know.

    Thanks for listening! (I mean reading:) )
  3. jj90


    If you've done well trading your own acct the past 8 years, trade for yourself. You know where the blame lies and profits are 100% yours. I recommend a 2nd job to pay bills while this occurs.

    Alternatively, you can look into getting your foot into institutions, but since your track record (although decent) isn't managing a large sum, expect to work up from back office to front.

    Being sales isn't all that bad, might be useful when you switch over to institutional sales with that background.

    Don't expect to be managing money instantly, you will have to work your way up. Just remember that big firms pull a decent amount of revenue from retail pitching. If your good and can land a book of 10MM+, 1% yearly comm is 100k. Not too shabby.

    BTW, which department were you in the force?
  4. cvds16


    I feel your pain, I have been a broker too at one time in the past, when I could choose stocks there was at least some fun into it, but when a few years ago people only wanted to hire me as an investment advisor to sell mutual funds I really hated the job. I don't think high of the salesmen I met either: selling crap at any cost to get a commission without any ethics was not my chosen way to get on in life. At this moment I have a totally different dayjob, which I don't really like, but at least I am doing an honest job.
    My solutions however was to learn a new method to daytrade. This took me a long time (as my previous method of trading options had disapeared a few years ago, so I had to start from scratch again). So now I daytrade as soon as I got home (I live in Europe and can stop at 4PM); leaving me a good decent four hours to trade fx. I have learned a lot over the last few months and my rather small account has consistently grown (although there have been up and downs) without me having to worry too much about my trades, no matter what happened I was payed at the end of the month. I am going fulltime again at the end of october. If you live in the US either trade fx or trade europeans markets or find some Asian market to learn the ropes. Try to keep thins into perspective: if you have a fulltime job, 4 to 5 hours of trading is about the realistic amount of trading you can keep up with in the long run.
  5. brokerage products are sold not bought. you are more useful to them as a salesman than a stockpicker.
  6. It's amazing to me the depth of the "the dirty little secret" i.e. the mutual fund industry is really the world's largest skimming operation.
  7. a friend of mine recently retired and wanted to roll his money out of his company. a morgan stanley salesman wanted to sell him a guaranteed 6% return product. he asked me what i thought and i told him not to do it there has to be a catch because nobody can guarantee 6%.
    well a few months later i see him and ask what he did. he says he went ahead with the product. so we dig out the paperwork and i look it over. it pays him 6% but it had a nice load and the yearly expenses come to almost 3%. his 6% guarantee became a 3% guarantee net.
    the hidden fees is where todays brokers make their money. if you get a large enough book of these residual products you can do well.
  8. rwk


    I am surprised that you didn't know going in that being a broker is first and foremost a sales job. I interviewed for broker right after getting my degree back in 1971. The interviewer was very clear that my interest in trading was considered a red flag negative. He wanted people who liked selling and were good at it. It was better that they not care what it is they are selling. Used cars was just fine. And this was a major wire house.

    It should be possible, while still working in your present job, to find money managers who have above average performance. Also, concentrate on developing relationships with accredited investors. I have a broker friend who has done that. Then when you have enough capacity lined up, go on your own as an asset allocator. Once you have a clientele and money rolling in, you can start trading a small fund of your own -- if you still want to.
  9. trendy


    IMO, LEAPup, there is no easy way out of your situation. Either you continue to suck-it-up and be a modern-day broker with all its warts and flaws, or you strike it out on your own. But, having little capital is obviously a big problem. Oh, you can no doubt find some prop firm to trade through but the split and vig will make it tough to earn a living. You have a family, how do you support them while you establish yourself as a trader? With no nest egg to draw from during this period of time, all you are doing is adding pressure to an already stressful situation. What about your wife? Would she be supportive of you making a jump? If not, then tell life to super-size that order of stress. So, are you willing to risk it all, or do you want to play it safe?
  10. A lot depends on which city you live in. If you live in New York or Chicago, there are many opportunities. If you live in most medium-sized or small cities, sales is the only job in the securities industry. Get off your ass and look for a another job, be proactive, be willing to relocate. You can't change the world, change yourself.

    Investing is like filing your income taxes, you can do it yourself or you can pay someone else to do it. A broker doesn't want to work for free, no one does. It's like going to a car dealer and saying I want to buy a car for the same price that you paid the factory. It ain't gonna happen.

    My advice... do what you like. If you can't make a living doing what you like, do something that pays the bills and do what you like on the side.
    #10     Aug 30, 2008