Dogbert,
Your point is well-taken. However:
Re: "What does a producer produce? Commissions, fees, loads and transactions (taxable events)?" What do you call newsletter fees? How about mgt fees on the portfolios that BB Sr. runs? I'm not knocking BB Sr., I'm just saying that everything costs money. If you want help managing your portfolio, you WILL pay some sort of fees, whether it is obvious, in the form of commissions or loads, or somewhat hidden in the form of mgt fees or subscription rates. There is no free lunch. Besides, I have kind of cooled off on BB's anti-broker sentiment. I think his venom comes from when he hears about a "shark attack." Lars and I have talked in great detail on this thread about these blatant shark attacks and how devastating they can be to the individual investor. However, I would think (perhaps I'm wrong, but...) that BB Sr. would have no problem with a caller telling him that he was being advised by a broker who had market savvy and had the right intentions. My opinion has changed on BB since I began following his thread. While I am just as appalled as he is over these shark attacks, since I have seen them first hand, I don't think he harbors ill-feelings toward all brokers, as long as they act in the customers' best interests. So I don't think BB Sr. would have a big problem with his son or anyone else becoming a broker, as long as he was doing it with the right angle--to help customers achieve their financial goals.
Do I think he'd have a problem with him working for a wirehouse? Yes indeed. Here is a funny story that happened to me yesterday--I swear its true. My main line kept ringing yesterday with some incoming fax transmission. After about the fifth time, I thought it might be someone trying to fax me something and they didn't have my fax line. So I hooked my fax machine up to my main incoming line. Sure enough, about a minute later, a fax comes through. Listen to this: it was coming from the local office of a big wirehouse here in town, intended for one of their clients! Apparently, the client's fax number was a couple of digits off from my main incoming line. The fax was this client's personal portfolio holdings. The broker, I might add, is the biggest producer at this wirehouse's local office. It was this client's portfolio! I couldn't believe it at first--what are the odds of a broker faxing something to his client and it mistakenly gets sent somewhere else--to ANOTHER BROKERAGE FIRM! Then I looked at the portfolio and I was appalled. There was so much trash in this portfolio, I thought I might need to call Browning Ferris or Waste Management to schedule a trash pickup. Unbelievable. The guy had a pretty sizeable portfolio, yet it was littered with each and every proprietary fund the wirehouse had offered in the past five years. The few stocks that were in it were stocks that the wirehouse had previously recommended buying, and were now in the toilet--I'm talking about stocks that went from $45 to $18 and from $15 to $ 1.00. Here was the best part: On the cover sheet, the broker wrote: (client's name), You know my thoughts, Best Regards, (Broker's name)." I had to laugh. "You know my thoughts" ??? Yeah, that you suck as a broker! Those were my thoughts as I looked over the guy's portfolio. Yet, it wasn't like the broker was subpar--he is the biggest producer in their office! What does that say about the wirehouse's ability to manage a customer's account? Not much, especially if you looked at this portfolio. It was a joke. This deal was a typical manufactured portfolio by one of the wirehouses--they encourage their brokers not to think independently, but instead to blindly buy the crap manufactured by the home office. So yes, I don't think Mr. Brinker could bring himself to rec-ing that his son work for a wirehouse, but at a regional firm where he could think for himself? Absolutely.
Dogbert, regarding your getting several cold calls, I can only empathise with you. Anyone cold calling with KO needs to get KO'd (sorry, I couldn't resist the play on words) or at least hung up on. My philosophy in prospecting has always been, "You don't need me to tell you about the Cokes, the GE's and the WalMarts of the world. You can do that yourself. The value I can bring to the table is to show you stocks that you may not be familiar with..." You're right--you can buy KO for the $ 9.95 commishes through E-Trade.
You're also right about the business card routine. Chances are, they know the stock they're gonna call you back with on the day they originally call you. I know, I know, I've already gone into the litany of how embarrassed I am over some of the cheezy tactics my fellow broker brethren employ--just ask Lars or Truman--we've gone into great detail on this thread. Its kind of a catch-22--you gotta keep prospecting until you've built your clientele up to where you are comfortable. So how do you prospect, yet not look like a cheeseball to the people you're calling? Tough question. I usually call people with an out of the ordinary idea. I have a bit of an advantage, because I am also a gaming analyst and have been on the local TV news and talk shows several times, so most people I'm calling are already familiar with who I am. I'll tell people about a stock that I know the schmucks aren't calling them with. I don't expect them to buy on the first call--if they did, I'd wonder if they were serious about the order. A lot of people just try and get me off the phone, and I understand that--I do the same thing when the long distance people or the copier salesmen cold call me. If someone shows an interest, I'll send them some research on the stock (not just a lousy business card). Every month or two, I'll follow up with a phone call, keeping them posted on my new picks or on the stock I had told them about. If things go right, sometimes I actually develop a dialogue with the people I'm calling back, to where they realize that I might actually know what I'm talking about, and eventually some open accounts with me. In the short run, its not too productive--most of these guys need to open several accounts per month just to keep their jobs. However, I've found that my approach works better, in the long run, to getting people to open up and do some real business. Show them that you're intelligent and that you care, and not some wirehouse schmuck looking to push the mutual fund de-jour, and eventually people will realize you're a little different than most.
Ok, so I'm rambling off topic, so I will get back to your post. "I think index funds and the internet and better awareness/education/healthy cynicism will replace a lot of bodies in the full service game over time. They will go the way of self service gas stations. When was the last time you paid $5.00 extra per fill up to have someone wash your windshield, pretend to check your oil and add a quart whether or not you needed it, and put a cute little orange ball on your antenna before you drove away?" You are right on the money. Lars and I have agreed that the brokerage field will look a lot different in 20 years, once the people currently 30-40 years old will control the money. Younger people avoid the wirehouses and the rest of the scheisters like the plague. Anything they (the wirehouses) tell you, you can pull off the Internet in 10 minutes or less. And how about these brokers who specialize in mutual funds? Yeah right. They'll be dinosaurs in 10 years also. IMO, the successful broker in 10 years will be someone who is willing to advise people with no-loads, and at the same time is an adept stock picker and researcher. And I'm not talking about some clown who just reads his firm's research reports for stock ideas. I'm talking about a guy that rolls up his sleeves and does a lot of due dilly on his own to find great stocks. I have seen (at least I think I have) where the industry is going in the next 10-20 years, and have positioned myself accordingly. I offer new clients insight on their no load funds--in exchange for that pro-bono help, I ask that they do all of their stock trading through me. I try and hold up my end of the bargain by doing a ton of due dilly on several stocks. I maintain good relationships with several other analysts, CEO's and mut fund mgrs, who give me good tips on stocks. I've had a lot of the "know it alls" in the business tell me I'm crazy for this approach--kissing away those commishes on loaded funds--but I think they're wrong--I just want to position myself so I'll still be in the business 15-20 years from now, instead of seeing my clients die and their heirs taking the account proceeds and running for the closest no-load funds.
So with that approach, I don't think BB Sr. would discourage his son from being in the business, although you're right, it would probably be more lucrative and less stressful for him if he took the mutual fund manager or newsletter/advisor route.
Gary |
