I built my book of business at Morgan Stanley mostly from cold calling. I worked on Third Avenue in NYC from 1990 to 2001.
As a retail broker at Morgan Stanley, I told my co-workers that I was confident that if the firm gave me the same tools the guys had on the trading desks, on less than $1 Million, I could generate a $10
Billion loss in less than 5 business days and take down the firm. That’s what the firm did in 2008, when they failed to properly supervise and manage their mortgage security trader Howie Hubler, and those who enabled him. They took nearly six months to lose Billions; I could have generated losses like that in only a week or two, with the same tools. If the firm’s goal was to LOSE MONEY, they could have done so faster.After taking all those losses from trading and merchant banking, Morgan Stanley and Merrill and UBS practically require retail brokers to have an average account size in excess of $100,000. They do not pay retail brokers for transactions done for small accounts. Customers will be charged full service commissions to buy stocks and bonds, but the brokers share of a $100 commission to buy $20,000 of stock, in an account of less than $100,0000 in size, will be ZERO.
If the broker has over $100 million under management altogether, if the broker has that new customer buy $20,000 of a front load mutual fund, of the $1000 load charge, the broker will be paid between $250-$500. If the broker has less than $10 million under management or so, of the $1000 load charge, the broker will get ZERO.
People who can really benefit from having a full service broker cannot obtain that service, unless they have at least $100,000 to invest, a quarter-million in NYC. I had a lot of small accounts and educated my clients, but taking the time to teach people about the financial markets, was using my time poorly according to management. I was told to get bigger accounts from wealthier people, and if I wanted to help the world, write a check to charity from my additional earnings.
Most of the top producing brokers at full service firms in Manhattan have more than $1 billion under management, with a minimum account size for new accounts in excess of $250,000. Each and every one of their clients has so much money that any competing broker will be happy to do business with that client, even if that client is a flaming A.
Being a full service broker to a book of flaming A’s is not as emotionally rewarding as being a full service broker to people who have just $5 to $50,000 who you help grow to $10 to $250,000+ and who you help do important life planning, like buying a life insurance policy when they become parents, and having wills in place. A full service broker like that would be at Edward Jones or Ameriprise nowadays, but will be under heavy pressure from management to direct people to invest in mutual funds, not directly in stocks and bonds.
For readers who picture you can get better returns for a cheaper price on your own, most $1+ million accounts with full service brokers directly owning stocks and bonds outperform most mutual funds and most hedge funds and most individual investors at discounters. That only tells you what you already know: life’s unfair.
-By BigGuy
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