Apr 18, 2013

Sarch: Morgan Stanley 3D, almost a year later

By Danny Sarch

I have teenage girls. They are wonderful kids and I am sure that many of you share some of the same challenges and funny experiences that my wife and I deal with every day.Have you noticed that teenage girls have a habit of bragging about things that they are supposed to be doing? (For the Chris Rock fans out there: Yes, this parenting/brokerage story is inspired by a Chris Rock classic comedy bit). They will say to me: “I cleaned my room” or “I did my homework.” Well, they are supposed to clean their rooms and do their homework. Those things are hardly worth bragging about.Recently, when I talk to Morgan Stanley Advisors, it sounds like I am talking to my teenage girls. Knowing that I and others in the industry have been critical of Morgan Stanley's technology woes over the last year, these advisers are occasionally defensive. But their protests sound a lot like my teenagers: “My system is not down” ... Read full post

Mar 7, 2013

Two dentists drill down into bonus-disclosure controversy

By Danny Sarch

So the commentary window on Finra's proposal to mandate that departing advisers inform their clients about incentives to change firms closed this past Monday. As time has passed since the initial brouhaha surrounding this proposal, I have some additional thoughts:1. The firms who are either unwilling or unable to give any type of upfront money are beside themselves with glee in the hope that disclosure will slow down or do away with deals altogether.2. Some advisers as well as some of my competitors oppose the measure either out of outrage (“too much disclosure, too much regulation, my compensation is none of your business”) or just plain fear (“NO MORE DEALS = NO MORE BUSINESS”).3. In a world where the demand for quality advisers at every production level outstrips the supply for the foreseeable future, upfront money is unlikely to go away on its own.4. The bridge between disclosures of deals leading towards... Read full post

Feb 26, 2013

When your firm costs you clients, Part 1

By Danny Sarch

Advisers can't stand to lose accounts. When I meet with Advisers around the country, virtually all of them are able to tell me with surgical precision how many accounts they have lost over the course of a year. More specifically, they can tell me the circumstances behind the losses.Some of these reasons are benign; there is a certain amount of "shrinkage" that every Adviser's book goes through over time. Clients move away and want to deal with someone local, clients move their business to a brother-in-law or college buddy who becomes an Adviser, clients get divorced and die: all of these reasons are outside the Adviser's control. To the extent that an Adviser can anticipate these changes he or she will be able to mitigate the damages or even prevent the loss. This is all regrettable, but experienced Advisers expect a degree of fallout every single year. They know that if they are not seeking new clients, then their business is... Read full post

Jan 9, 2013

Scandal does lead to adviser attrition — but not right away

By Danny Sarch

Quick snapshot into Danny Sarch's life: Mega Producer Team (MPT) leaves Big Wirehouse on a Friday. Like death and taxes, a few things are certain. First, the Losing Big Wirehouse will slowly let leak that the team had “money problems,” or that the business was in trouble, or that the biggest clients of said team were going to stay at the firm. It's partly to make themselves feel better, and it's partly spin to retain clients, because nobody likes to admit that they actually lost someone good. (One of Sarch's rules: In the Wealth Management Industry, nobody will ever admit that they lost someone good or hired someone bad.) Second, one of the reporters covering the Wealth Management Industry will call me to discuss the move. And in an attempt to explain the reason why Mega Producer Team left Big Wirehouse, they will associate it with the latest industry scandal.For example, Bank of America announced this week a multi-... Read full post

Nov 29, 2012

Sarch: Full disclosure on recruiting incentives? Bring it on!

By Danny Sarch

Dan Jamieson of Investment News reported on Wednesday that Finra was considering a rule whereby advisers and their firms would be required to disclose to clients the transition packages that advisers receive when they change firms. I've been predicting this for at least six years, maybe longer, and have been wrong every year, at least up until now. Transparency is the trend with clients. Hidden charges, points in bonds, conflicts of interest: The best firms and the best advisers should and do welcome full disclosure to their clients. Similarly, we routinely advise the advisers with whom we work to be forthcoming about the deals they receive. Why? Because advisers at the jilted firm -- advisers, who upon a former colleague's departure see dollar signs in front of them and who call their “friend's” book -- will use the recruitment deal against the departed adviser. “Mr. Client, I know you have worked with Dave for... Read full post

Oct 23, 2012

The end game: Why every adviser needs a 'go bag'

By Danny Sarch

Watch any spy movie and the protagonist always has a bag stashed somewhere safe with extra passports, cash in multiple denominations, and a gun. If he or she has to flee in a hurry, the “Go Bag” is always ready.Every financial adviser needs his or her own “Go Bag.”Why?You might have a retention bonus or a recruiting deal banked. But they are NOT employment agreements. In fact, the language in these contracts specifically states that it is not an employment agreement. As always, advisers are “at-will” employees. Simply put, that means that the firm which employs you has the legal right to fire you at any time, for any reason that does not violate the law. You, as the terminated employee, of course have the option to file a claim against your nasty employer if they have done you wrong. That could take years and in the meantime your clients will be long gone. If you are a good revenue generator, ... Read full post

Sep 13, 2012

The strange tale of Mr. C. Bank and Mr. M. Stanley

By Danny Sarch

Mr. C. Bank owned a hotel that was the envy of the rest of the Street. Falling upon hard times, Mr. Bank needed to sell his hotel, and quickly, in order to concentrate on his other businesses. Mr. M. Stanley, already owning other properties on the Street, was one of those who had always coveted the Bank Hotel. In the heat of a time pressured negotiation, Mr. Bank and Mr. Stanley agreed to an initial payment for the hotel, acknowledging that it was less than the total amount that would ultimately be paid. After Mr. Stanley rented the hotel for three years, they would consummate the transaction based upon the market price for the hotel at that point in time.The agreement made sense for both parties: Mr. Bank received needed cash to support his activities elsewhere around the world; Mr. Stanley added the hotel to his own holdings and looked forward to dressing it up, making it more attractive to the rest of the Street, based on his... Read full post

Jul 18, 2012

Sarch: Behind the defection infection at MSSB

In the near future, the Smith Barney name will disappear below the horizon, following its culture which has long been swallowed up within Morgan Stanley. The final Smith Barney offices converted to the new “3D” technology over the weekend of July 7-8, while senior management is apparently planning another round of layoffs and office complex consolidation, mysteriously named “Project August.”The trade press continues to report on large defections from MSSB around the country. This diaspora may be a result of the culture change, or possibly a decrease in service levels to the adviser. Or maybe, senior management has failed to show an understanding of what their own advisers do every day. For example, built within the 3D system is a sophisticated price metrics system. It analyzes typical fees and commissions charged to clients all over the country. By all accounts, it is a useful tool. But picture this... Read full post

Jun 1, 2012

MSSB woes now in 3D

By Danny Sarch

MSSB is under siege. And I'm not even going to talk about Facebook. Whoops, it slipped. At the adviser level, the siege begins with the tremendous challenge of a new technology platform being rolled out to all employees. The legacy Morgan Stanley advisers and many legacy Smith Barney advisers are already working off of the new system, called “3D.” This system has had numerous challenges this year with entire business days lost to slowdowns and glitches. The frustration level has been very high and one adviser told me: “The system's name is short for ‘Doesn't Do Diddly.'”To be fair, those outages have slowed and the challenge in launching such a system should not be underestimated. An IT expert friend of mine told me that the best way to understand the impossibility of doing this perfectly is to think of a new stadium opening up. Apparently, before the stadium opens for business with 70,000 fans in... Read full post

May 10, 2012

New wirehouse math: Inside the numbers

By Danny Sarch

Let's say you're running your own sales force. You have a certain number of salespeople and a certain amount of revenue. How do you compute the average per salesperson? Well (and I was an English Major), the answer is simple division, right? In the headhunting world, regardless of industry, it's called a “per desk” average. If you have a recruiting firm with 10 desks, and you are doing $2 million in revenue, then your per desk average is $200,000. The Big Brokerage business, however, likes to report its own numbers which mysteriously favor whatever statistic that they are comparing. When reporting the total number of sales people, the Big Brokerage firms count EVERYONE, including rookies as well as other registered personnel. Yet, when they report an average production figure, that number excludes trainees, and the other registered personnel. And the definition of trainee is often extended to a three year Adviser. ... Read full post