Mod note: Blast from the Past - "Best of Eddie." This was originally posted in July 2011.
I was pretty nervous my first day in the business. I'll admit it. Before I got hired, I thought I knew a good deal about the market. Filing into that conference room with the rest of my training class at 5:30 am, I realized I didn't know shit.
I'd passed the Series 7 about ten days earlier, and the Series 63 just two days earlier. Though I'd done well (I got a 93% on the 7 just studying on my own), my new training manager was quick to point out that anything over 70% was wasted effort, and that kind of inefficiency just wouldn't do in this line of work.
I looked around the room. I looked at my fellow trainees, trying to spot the weak ones. Trying to figure out where I fit in. Trying to decide which of them would be the first to screw me. Then I glanced around at my surroundings. There was a TV and VCR (remember, this was 1992). A long oak table with 20 or so chairs around it, and more around the perimeter of the room. And hanging from the ceiling in the center of the room was a banner that read 30-30-30, only vertically so the 30s were on top of each other.
I wondered what it meant. But not for long, because my training manager came storming in. I'd never met him, and I suspected that was the case with the other 30 trainees. Meeting Larry before your first day on the job would have been counterproductive for recruiting.
He stood about 5'7" and had beady eyes and a magnificent Jewfro. He had an extraordinarily low opinion of trainees, and delighted in pointing out to us that we'd be lucky if more than one of us survived four months (the training cycle) at the firm. He was hell on wheels while we were in training, but he and I actually became friends later in my career, and I ended up screwing him royally when he stuck his neck out for me years later. But that's a story for another time.
We trainees got to know each other a little bit over the first week of our training. We were all still waiting for our broker numbers - that magical imprimatur provided by the NASD which confirmed you as a full-fledged finance professional and authorized you to pick up the phone and begin fleecing an unsuspecting public at will. For some reason, I was one of the last to get my number so I spent a lot of time in the conference room staring at that banner.
After a couple weeks, one of us mustered the courage to ask Larry what the 30-30-30 meant. This is just a glimpse into how the business worked back then, but it was all about motivation.
30-30-30 was the gold standard of broker performance. Any broker at the firm who pulled off 30-30-30 would be richly rewarded - as often as he (let's keep it real here - there were no women doing this back then) managed to pull it off. Larry's beady eyes actually lit up when he was explaining it to us.
If a broker at the firm over the course of one month:
- Opened 30 new accounts
- Earned $30,000 in gross commissionsand
- Bought $30,000 worth of mutual funds for his clients
he had his choice of one of the following (on top of the money he earned for the month):
- A Harley-Davidson Fatboy
- A Rolex Presidentor
- $10,000 cash deposited into the mutual fund of his choice
Believe it or not, guys did it all the time. Maybe not every month, but every couple of months someone from one office or another would hit the numbers and get the bike. Oh yeah - nobody ever took the watch or the cash, at least not the first time they hit 30-30-30. Everybody wanted the bike. Guys who hit the numbers more than once went for the other swag, but I don't think anyone ever said no to the Harley on their first go-round.
Now let me put this in perspective for you. 30 new accounts is pretty self-explanatory. You just needed to open 30 new accounts in a month. I never did it (I think my personal best was in the low 20s), but it could be done with a little luck and a lot of hard work.
$30,000 gross was another thing altogether. $30,000 gross generally meant that you needed to raise $600,000 in new assets over the course of the month. That might not sound like a lot by today's standards, but back then a guy could set his watch by earning $100,000 a year with only $1,000,000 AUM. Generally speaking, your book paid you 10% per year.
$30,000 gross also meant you earned $19,500 before taxes for the month. At the time (at this firm, anyway) anything over $25,000 gross was at a 65% payout.
$30,000 in mutual funds purchased for clients should also give you an idea of how things worked back then. Managed money was a joke. Why on Earth would you turn money over to a money manager who wasn't likely to beat the S&P when you could just manage it yourself? Every broker was his own hedge fund manager back then. If you lost money for your clients, they quit giving it to you. It was that simple.
But the SEC wanted to clamp down on "stock jockeys", and one way to throw them off your scent was to commit a few dollars to mutual funds. It was a piss poor idea, it was certainly not in the client's interest most of the time, but it was the window dressing the SEC required to stay off the firm's back. This was years before themodel became widespread and fucked up the business forever.
As a young trainee, every single one of us pictured ourselves on the back of that Harley with a Rolex on our wrist and ten grand in some dogshit mutual fund. Alas, it was not to be for my training class. I ran all but one of them out of the business (but that too is a story for another time) and neither he nor I ever pulled it off before we moved on to greener pastures.
I shudder to think what gets dangled in front of today's brokers to get them going. Dinner at Appleby's? Angift card? Free car washes for a year?
But I guess if all you're doing is raising money for some other jamoke to lose in the market, you get what you deserve.