so just to extend my questioning - for the small percentage of brokers whose strength is stock picking / portfolio management rather than client relationship management - what happens to them (assuming they don't become private traders) ? Do they become independent brokers to avoid big-firm compliance, or do they just get jobs in portfolio mgmt at mutual funds or something...
Michael - being a broker and a professional stock picker cannot go hand-in-hand. It is very difficult (if ever) for this to exist in the current lawsuit-scared firms. There's just too much liability for a firm to allow one 'crazy' broker the ability to also actively trade stocks for THEIR clients. In the end, the firm's ass is on the line and we all know where the deep pockets are.
Agreed. Brokers picking stocks, and literally managing those stocks with discression went bye bye years ago. If you're an independent, and your B/D is lax, then maybe... But, I don't know of any big name firms out there allowing it. From what I've seen here is the retail brokerage business: * Hide your leads daily, or some guy in your office will have the people YOU have been calling in, and a ticket entered before you know it. Oh yes, we had a "top" producer doing $875,000/year get caught stealing leads out of the desk of a rookie broker. No, nothing happened. After all, he's the "top" producer, and allowed to be an ass hole! Grrrrrr!!!!!!! * Come in early, and start calling. * Have lunch with one of the numerous wholesalers... (I call them the drug dealers. LOL!) * Go home late, and call some more. If being "chummy" is in order, have a drink first to loosen up. * Hope that your clients who watch CNBC will refrain from calling every day asking, "what are they saying with this recession stuff?" or, "we got a call from another broker telling us___, ___, etc.," Maybe I'm just not a "chummy" kind of guy who would steal leads from another broker with a wife and kids... I've been a broker for four years now, and wonder what the hell I got myself (and family) into...
I understand where you're coming from here too. From what I am seeing, compliance is a necessary "entity," as bad as I hate to admit it. However, they have created an "environment" between us- the brokers, and them- compliance so they don't have to pay the regulators big $$$ all the time. (Or so they think. I wonder if the Compliance Principals out there are really helping prevent errors/complaints, or helping speed them along...) The problem: Compliance doesn't know what really does fly, and has made the job an absolute task these days. The regulators FINRA (Fine-ya!) the SEC, and the compliance idiots have made me start to ask, "is this still America? Is common sense not common in 2008?" Yes, the compliance idiots ask me stupid stuff all the time (via e-mail so they can have their asses covered), and it's gone above and beyond dumb! I've not been asked about using stops in my own account, but they are constantly trying to see if we're front running, etc., Strangest job I've ever had...
Actually, searching around the net - this is probably already obvious to most of the thread - I've learned there is another type of registration: Registered Investment Advisor. Probably a completely different business model than Series 7. For example, here are a couple of links; granted, the authors are biased, but it is informative to read (I have no relationship with these firms, I just pulled them randomly off the net). http://www.wealthanalytics.com/perspectives-archive-april2007.shtml OR http://www.beamcap.com/FAQ.htm So it seems that a broker who loves picking stocks and managing portfolios, and hates the restrictions, should either become an RIA or join one. Thoughts from the brokers out there?
Michael - going the RIA route is typically something an experienced Series 7 broker does when he goes independent. I suppose this could work for your idea, but not sure how practical or realistic it is. It's worth probing around though to see.
MIchael, When I left, this was an option (RIA). YOu take your book. Keep more of the pay ( usually 70-90%), clear with a larger institution catering to this type of structure and continue to manage your client's assets. Usually you agree upon per annum a fee with your clients of approx. 1% of AUM and all the in's and out's of mutual funds, ETFs, are liberated. Basically your primary source of income growth is increase your asset base, hence, you should like being chummy chummy to get people's business. Once you establish a base of, let's say USD50MM+, your income stream get's interesting (USD500K) and you focus on asset allocation with your clients with a small tactical portion of your portfolio dedicated to trading. Don't get me wrong, this is actually a very nice field of business to be in. Compliance is usually not so much on your neck when you are a RIA ( Please correct me if I am wrong someone..) my issue is that #1 I don't like the chumming around and #2 I got to the point where I would be making more money swinging and scalping than I was going out and "Developing relationships". The former started to take time and attention from the latter, hence I started to lose real money making opportunities because I would be on a plane trying to make friends with the CEO of XYZ business so he would open an account with my and I could add his assets to my annuitized stream of business. If you are the "build and manage relationship" type, this is definitely the field for you. It was actually all I knew until my fingers got nimble enough to go out and make money off of playing the harp.... catch my drift? It was not for me but I know plenty of Joe's who are still at it and actually do very well.
Michael, I'm an IAR. Investment Advisor Rep. (Series 66) If you're not a Series 24, you'll have to have an Office of Supervisory Supervision. If you want to go it without a firm behind you with a 90% payout, then, you can get your Series 65 or 66, register with your state, and clear through Schwabb (or whoever you like) It's strange how the regulators have made the designations, etc., There are a bunch of firms out there who specialize in RIA only practices, however. And again, if you want to go it alone, get your 65, or 66, and register with the state as a Registered Investment Advisor. 50% of my work+ is RIA (fee based) Good luck to you!
We think alike! I hate the "chummy" sh*t more and more everyday. Of course, if you get your book annuitized (in fee based accounts), at around 50mm on a 90% payout, that will certainly pay the average bills at home. Then, trading a small portion of their LNW (5-10% for my clients) in higher beta equities with special attention to entry and exit. I catch myself not wanting to call the same people all the time with the same "chumminess." Not that I don't like them. I just don't bullshit a ton during the day, and like to be more "in the markets" than on the phones.