boy with a chip on his shoulder who has a problem with brokers over 35, white people, women, Jews, and anyone with an IQ over 100 or more than a junior college education (that means can add, subtract, multiply, divide, and spell) is going to be leaving for a private fund Jesse Jackson set up.
Yes, all that money Jesse fleeced from his faithful has been placed with some hedge fund based in Belize and nonuts is going to be a junior portfolio mgr with them in addition to other duties like driving a cab and managing a string of shoe shine stands on slow days.
If the older Bache brokers are fed up with PRUSec losing $1 million plus a day because Mikey Rice hired too many kids like nonuts, my fave firm, Bear Stearns ($2.00 per share in net earnings last month) is hiring.
Bear has NO problem with brokers over 35, white people, women, Jews, or persons who have more than a junior college education. Please feel free to trade up to Bear Stearns, Bache brokers. If you're an African American Bache broker, that's fine, too. We have no problem with you, either.
IMS was once under PSIs domain but was moved to mother PRU a number of years ago. The IMS coordinators I have discussed the issue with feel they have a job for the three year contract and then they are likely gone. They also feel that WB Sec.'s more diverse lineup of managers will be available through MACS CS after the merger anyway.
I'm sorry to say my opinion on this matter has changed over the last few years. Before the implosion of Pru's MAC program I used to believe fee based advisors at Pru were gaining on the old guard. Unfortunately the IMS department let their own arrogance and greed bias their selection of managers. Even worse they marketed certain growth MACS managers to the exclusive of everyone else. The IMS has been far too restrictive in letting manager get their seal of approval. By demanding MACS manager pay up to 23 basis point to be included in our MACS program IMS has artificially excluded all but the largest top-heavy managers from our program. Pru IMS department has been slow to innovate. They have failed to search out and cultivate the best talent available. WB by contrast has been much more open to management talent, giving their broker a much more robust and diversified group of managers to select from. By letting WB brokers have the freedom to decide which managers are appropriate for their clients WB places the responsibility for manager selection where it belongs, with the broker. My only regret is that WB has signed a three-year agreement with IMS to provide consulting services. Other than Judy Rice IMS is the largest collection of pretentious snobs this firm has managed to recruit. Too bad WB didn't ask the brokers first before hiring these losers.
MACS is not the end all. I was just doing the 1st quarter review with a large account and 5 of the 6 managers underperformed their benchmark (6 different styles). This, plus the way some of them were trading last year leads me to belive they don't have any better grasp of the market than we do.
Target has held up much better.
By the way, why leave this Friday if you are such a big fee based broker? It is the end of the month, but the check for all this production won't be cut till next week.
Would you say that those that have the NUTS to stick with a discipline like yours are in the majority or the enlightened minority at this firm?
Do you think that contributes to the state that PSI is in now?
Please answer when you can (probably busy meeting with transactional, informal, wanna be account exec's clients).
In fact, regulators thought that many of these programs resembled mutual funds so much that they amounted to de facto "unregistered" funds. Now the programs are structured to comply with Rule 3a-4, a safe harbor. Most B/D sales organizations are marketing 3rd party expertise. Nothing new. It's been a growing trend for some time now as fee-based business has gradually replaced transaction-based business.
True, its not a one size fits all world. But blame Pru for setting the stage for brokers to sell one MACS manager (and one style, mkt cap) to clients. I wonder how many managed accts opened in 1999-2000 had one manager, either TCW or Campbell? From the brokers who've blown up, I've seen the ruble. There is nothing to salvage.
For ones who do follow a discipline, managed money one of the best ways to leverage your time & do the right thing for most clients. If you are transactional, & have a lot of clients with stocks you think they should sell, who gets the first call? Who gets the last call? What happens if they don't take your advice? That's my delima. Been there, done that.
Nonuts, I think we have tapped into a fascinating subject here. I also know that once one as drank the cool aid of wrapped fees there is no turning back. So I won't try talking you out of your entrenched position. But let an experienced FA ramble a bit won't you?
In the 1980s real estate was the considered a mandatory part of every �well diversified� portfolio. And the LP was born! At one point all the majors considered it a substitution for bonds and CDs and certainly the larger clients were encouraged to have a percentage of assets in limited partnerships! We watch as entire AAA muni bond portfolios shifted to equities and limited partners within a five year period. In those days the Ivory tower used financial planning and the financial supermarket mantra to place product into the hands of the gullible. By the early 90s the concept was exposed and the rest was history. Those departing brokers left little behind in the way of leftovers by the way! ;)
The firms have always wrestled with the dilemma of how to avoid law suits and more importantly, keep revenue streams steady quarter after quarter. The wrap fee was the perfect answer. And as someone stated, it is easy to sell to the uninformed in a raging bull market. And so the concept was born. To answer your question- why do prestigious firms buy managed money boutiques then? Because as Willie Sutton said when asked why he robbed banks- � because that is were the money is!�
But now the down side of wrapped business is beginning to show it�s ugly head. The continuing decline of personal net worth and the dripping of quarterly fees is a deadly combination for continued client relations. You surprise me with the egotistical comment about stealing my clients who are in individual securities? I find it VERY easy to take over accounts that are in the MAC/pruchoice type style. Simple reason is ongoing fees, sub performance and the way it was sold to the client to begin with. Remember � I�m in it for the long haul- three to five years at least!� Too funny!
What you need to revisit nonuts, is the individual concepts of savings, speculation and investing. And then, life time need and excess wealth concepts. In that analysis, you will find that 70% of the people being sold managed money are NOT candidates for managed money. So each time you delivery the WRONG client to the alter of managed money for sacrifice to the Ivory tower you do a dis service to that client.
In the end, managing client�s money is more of an art than a science. This is true no matter how many one dimension software programs you try out to dazzle and blind the current yuppie couple sitting on the other side of the coffee table! Sorry- it�s a fact. Not to worry though, all there things will become clear to you in time. It�s just a matter of figuring out the game as you gain some experience. SP
You are missing the point. I only accept fee-based accounts. I have no interest in building a transactional book of business. Clients can freely choose to work with a transactional broker if that makes more sense.
You may choose to run a walk- in- clinic that accepts all types of patients. Like a specialist I run a very focused business concentrating on clients with net worths between 1,000,000 to 10,000,000. Clients who can easily afford to pay me 5,000 or more in fees every year.
I am not and never will be a general practitioner opening up 529 accounts, selling mutual funds or baby-sitting transactional clients who look at investing as a game.
Ideally I'm looking for 200 clients who can afford to pay me 5,000 a year for my time and expertise. I'm 80% there already and have not had a down year since joining Pru ten years ago.
My biggest concern about this merger is that WB is going to try and turn me into a general practitioner.
If I ever hear my manager say, we wouldn't want to lose any of those CD customers now would we. I'll be gone so fast it will make their heads spin
So what you are basically saying is you little about investing when it comes to stocks or bonds? Let me get this straight...You spend all day managing relationships and quantifying risk for your clients. And after that you place your clients assets with the appropriate MACS managers based on your pre-determined asset allocation models
My question to you is what are you actually offering? Can't that same guy go to Charles Schwab (fill-in-the-blank), get an indepth risk profile as good as yours or better, and get those same managers at a cheaper cost?
Why do they need you for? Are you RoboCop that keeps them from dipping into their money when times are bad? Is that worth 100 to 150 extra bps?...maybe if sweeping money markets is worth 30 bps :)
You then say, "It takes an asset allocation policy ACTIVELY followed. Equal to rebalancing.
Is this how the classic investors such as Warren Buffett or Sir John Templeton accumulated their wealth? No, they have done just the opposite. Buffett says that asset allocation is simply hogwash in principle. Its Wall Street's packaged sales product in a futile attempt on how to ATTEMPT to be average. What you ignore is that capital gains taxes over the long term eat up most people's profits that are not eroded by inflation with a very active strategy of rebalancing.
Back to stocks...Quality is not measured by a name. Its measured by sales, earnings, profit margins, and business models. A quality company is usually one that exhibits great consistancy in all of these factors. Holding a stock solely based on hope in a name is as you say nothing more than a "a lazy man's lottery ticket". Just because a broker is transactional does not mean that he proceeds for his clients in this fashion. Lastly, I shouldn't have to tell you this, but in the stock market perception is not always reality (see the late 90's!) Also how can you depend on our analysts when the average turnover for a Prudential analyst barely reaches the time it takes to achieve a long term holding period.
You say Quantum is unmatched on the street. First of all the track record they use is bogus and most if any of the active Quantum managers have NOT achieved those type of results long term FOR THEIR CLIENTS. It is also a very active program that also ignores the effects of taxation.
(Please read Part 2 before you respond)