How PWM really works (part 3): PB v. PWM, lifestyle, hours, day in the life

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Sorry this took so long everyone! Hope you enjoy and hope it's not too terribly long.

For the 3rd installment of my blog, I'll detail some of the differences between PWM & PB as well as the lifestyle for an established broker.

For those of you just tuning in, take a look at the first 2 blog entries to get back up to speed:

Part 1: Past, Present, Future, and $$$
Part 2: Breaking In, Staying In, and Getting Out

WHAT DOES IT ALL MEAN?

Let's clarify PWM first

First, I think it's instructive to define exactly what I mean when I say PWM and PB. By PWM, I mean traditional brokerage at a broker dealer (member firm of NYSE), where you can operate as a sole proprietor, a team, an institutional team (like James Wallace of Merrill or Mark Curtis of Morgan), or part of said firm's private wealth division, where the payout structures are similar, can still be team/individual/institutional, but the minimums are higher and the marketing looks different. For how this looks, see my first post on PWM. To be clear, all of the big 3 have these divisions that they call "PWM" as well as just "wealth management," and they really are not that different. UBS & MS call it Private Wealth Management, Merrill calls it Private Banking & Investment Group.

At my firm, and I'm sure it's this way at the other 2, the compensation works exactly the same in PWM as it does in WM, with one exception: minimums. These firms PWM divisions are very small from a headcount standpoint, they might have a dozen offices across the country (in the cities you'd expect: NYC, LA, SF, Chicago, Boston, Houston, Atlanta, etc.), but their minimums are not small. Whereas in my business (I'm in my firms Wealth Management division, I just use PWM because it's the convention for this forum) we determine our own minimum for the most part, and my firm pays me on anything above $250k, the minimums of these PWM divisions are usually $10-30mm of investable assets, and the firms will not pay you on anything less than $1mm investable.

So, PWM is better than WM, right? Wrong. So, PWM guys make more money than WM guys? Wrong. So PWM guys have a better lifestyle than WM guys? Wrong. They're mostly the same thing, except for the minimums, and having different minimums has residual effects. There are guys in my part of the firm who make more than PWM guys and there are PWM guys who make money hand over fist compared to some people in my side, it's just a different beast. PWM guys will have much more assets than a team like mine, lower ROAs, less client relationships, and a different type of clientele.

OK, now PB...what is it?

Private Banking is a version of wealth management and you can think of them as like the differences between IB & PE, or something like that. I say that because many of the skill sets are transferrable, but the comp structure, clientele, responsibilities, etc., are all different. Major Private Banks include Wells Fargo Private Bank, JP Morgan Private Bank, Northern Trust, US Trust (BofA) and others. From what I've heard, Goldman's private wealth division is sort of a hybrid between PWM and PB, but leaning more towards PB. Same for Credit Suisse, but none of this is based upon experience, but secondhand info from friends/clients. Also, yes Northern Trust is a trust company, but the model is almost identical to most private banks. Private Banks can be part of a larger brokerage firm and they usually are (JPM, GS, CS), but trust companies which use a similar business model to PB are usually just affiliated with a broker-dealer firm but are independent for all intents and purposes.

The Clients

The #1 difference between PB & PWM is how the clients are viewed. In PWM, if we wanted to, my partners & I could walk downstairs to another wirehouse and over 80% of our clients and probably over 90% of top clients would come with us. They are loyal to US, not to our firm (for the most part). PB is much different, clients are sold on the bank, probably by one of the rainmakers (will be called a relationship manager and probably have similar pay as a top PWM guy), and if the banker recruited a lot of his relationships, his clientele is probably portable, but on the whole, PB relationships are stickier than PWM if a broker leaves. The client is viewed as a client of the bank, and in some situations the client's information is shared across other divisions of the bank so the RM (relationship manager) might get emails periodically from the bank's business brokers or mortgage brokers asking about his client, and while you can talk your way out of those to an extent, the bank makes higher margins on credit products, not on a muni bond account billed at 40bps, so eventually your client will get offered a product you didn't recommend. PWM is nothing like this. My branch manager can see my clients, so can my compliance and operations people, but none of them would dare contact a client before running it by me, that's a faux pas. I did a brief stint at the retail side of a major bank (BAC, WFC, C, one of those), and I can attest to this from my interactions with our private bankers. May not be this way everywhere, but I was a bit alarmed when I figured this out.

What the clients look like will be on the surface a lot like PWM, it just depends which model the client likes more. There's no rule that says once you cross over a certain liquid net worth you're better served by a private bank versus a PWM firm, it's all about preference. Something to be wary of however, if you end up as a financial advisor or retail banker, the bank will almost force you to give up clients past a certain asset level. At my bank (before I moved to PWM), I discovered a prospect worth mid 8 figures, I had the relationship, trust, etc. As soon as a private banker saw her net worth (remember, data is shared across the entire company), they swooped in and tried to steal it from me. I hope that gets you the gist of how the PB experience is different from PWM, but please ask clarifying questions.

The Employees

Another huge difference between PWM & PB is PB has pretty much one model: team of people helping individual assets. Sidebar: individual assets are anything where the client has direct and controlling interest in the money. Examples would be personal savings, family business, trust accounts, farmland, etc. Institutional is where the client (CIO, HR person, board of trustees) is a fiduciary but it's not his/their money. Most institutional accounts will have 1 of 2 models: either a CIO who's internal and simply hires & fires money managers, or hire an institutionally focused PWM guy who will then hire managers. As you might imagine, any large institutional account will have its own CIO, but smaller ones can't afford someone quality so they will do it a different way. Examples of institutional accounts are pensions, endowments, stock plans, corporate accounts, etc.; I mention this because there's a different sales cycle, emotions, etc., with institutional money. That's how I define them, and while others disagree, I think the definition works. As you might imagine, the clientele affects the employees and their roles.

Every PB operation is a team, and there are almost always the same usual suspects (at least one of each): relationship manager, tax guy, legal/trust guy, investment manager (PM), a banker, an insurance guy, and staff. But wait brofessor, don't you work on a team? How is this different? Settle down spaz, I'll explain. Yes, in PWM, there are teams that have specialists, but for the most part, everyone is a generalist at heart. This means that if all of the partners went on vacation, I could answer just about every question a client threw at them. On my team, we have a guy who's our go-to for legal issues, but the rest of us are perfectly comfortable answering 99% of all legal questions. In PB, while everyone will have the ability to have a conversation with a prospect/client, there will almost always be those segmented roles within a group.

THE LIFESTYLE

General lifestyle stuff

Our business is great and lends itself to a very laid back lifestyle if you want it to be. There are guys who get maybe 4-6 hours of sleep per night, but there are also guys who spend 75% of their time at their beach house and only come into the office to meet with clients & potential clients. Because good PWM practices can survive day to day with good partners & assistants, you don't have to miss much in the way of family stuff (baseball games, moving to college, ballet recitals, etc.) if you don't want to. Part of this is because PWM is very entrepreneurial, but most of it I think is most everything clients call about is not URGENT (as in needs to be resolved rightfuckingnow), and even if it is, there's a 99% chance one of your partners or assistants can solve the problem.

I love the lifestyle I have, I control my hours, I don't have to ask for days off (I simply make sure that there's at least one other partner in the office in case clients have questions), and best of all, I don't feel bad about doing whatever the hell I want. Of course, and people who make their own schedules will agree, this probably means I work more hours than if I had a set schedule. Oh well, I love what I do so it doesn't feel like work.

The hours

This is probably the most attractive part of PWM...on the surface. People hear tales of guys working 20 hours a week, playing golf 3x a week, and clearing 1mm per year, but it's not that simple. Yes, there are brokers who are in the office an absurdly low amount of time, but for the most part, these guys are coasting. They are making good money, probably have no kids to take care of, have great sales assistants, and have a loyal & compact clientele. So aside from meeting with people and making investment decisions (all of which can be done remotely or out of office), there's not a huge need for face time in the office. Coasting means they are probably not doing much new business development, so if the markets are up, they're up or flat (people die, people spend money, clients leave, etc., most books can expect 2-5% attrition annually, depending on your clientele), but if markets are down, they will be crushed. This is certainly common in the business, but elite advisors are not like this.

Keep in mind this is for an ESTABLISHED broker, someone probably 40-60 years old who has at least a million dollar practice (or whatever your "number" is), not someone who's focused on growing (regardless of age). Of the people I see growing their practice, they're working 40-50 hours a week in the office, and if you include extracurricular activities that will generate residual business (golf, NP boards, church finance committee, stuff like that), the number is probably higher. Elite brokers are very visible in the community and do a lot of schmoozing. However, while it may generate business, the best brokers out there are involved in things they'd be involved in even if it didn't help business. For example, a guy in my area sings choir at his church, has gotten some accounts from it, but he wasn't passing out business cards during hymnal, if you follow that.

For a brand new broker, you should expect 70 hours a week minimum. This includes time in office, offsite meetings, outside training/involvement, business reading, etc. As I've said before, the name of the game in PWM is sales. If you're not selling, you're not working.

Day in the Life

So here's a specific example of a day in the life of an established broker (makes over 1mm per year) who still wants to grow, but keep in mind this will vary day to day. If you want more detail on any of the below, let me know.

8-830am: arrive in office, check email, morning market updates, WSJ

830-9am: review numbers, like revenue hitting the books overnight, deposits & withdrawals, morning meeting w/team to discuss issues at hand

9am-1030am: meeting with new client

1030-1130am: con call w/attorney, banker, and clients in the middle of a business dispute

1130a-1pm: lunch w/current client & friend he wants to introduce us to

1-130pm: con call w/client in hospital, getting update

130-2pm: call w/CPA regarding client whose company got taken public, discussing taxes as they relate to selling stock, putting collar around it, doing exchange fund, whatever is most efficient

2-3pm: internal investment committee meeting

3-6pm: return incoming calls from day, follow up on potential new clients, plan next day, go home

Most Fridays for established brokers will be a 4-6 hour day, and will probably just be client calls, maybe an internal meeting, really light stuff. In addition to the above, teams like ours that manage our own money will probably have 4-10 hours a week for business reading (stock reports, manager updates, economic news, stuff like that).

My days are bit more hectic than this since I'm not yet a 20 year vet, but this is what I hope to get to by the time I'm 35.

What about rookies?

I hesitate to do a day in the life of a rookie broker; I don't want to put what I did as a rookie up here because there are tons of ways to build a business and my way isn't the only way. I also don't want someone to copy exactly what I did, fail, and then blame me for their failure. Most of the success of people in PWM is hard work, yes, but it's also a function of intellect, sales skills, secular market cycle, and possibly an X factor (people tend to like you and are drawn to you), not everyone has this. Hell, I'm not perfect, but I think I have a teeny bit of each of those (PWM also requires a bit of cockiness). The key takeaway is when you come into PWM with 0 clients aside from yourself and maybe parents/spouse, you need to get new clients faster than you can possibly imagine. It is as if you are building a brand new business with no customers, you have to market, and to get your potential customers aware of you quickly, you have to contact them en masse. To contact in masse, you have to work long hours. Uncle Eddie did a post about cold calling and what a day in his life was like, PWM has changed a lot since then, but a rookie who cold calls (like I did and still do to this day) can expect to be on the phone for at least 4-5 hours a day. Same goes if you're one of the rookies that does seminars, you have to call people to invite them, no? Same deal, lots of time on the phone. Additional work that comes with this is sending mailers, proposals, making follow up calls, and so on.

In addition to prospecting for several hours per day, rookies have other responsibilities too. You have to constantly replenish your potential client list. This will entail researching your target market (the people you want to do business with), gathering leads, managing your leads database, etc., expect this to take a couple of hours a day. Also most rookies should expect a few hours per week to work on sales skills. It's not necessary to do something like toastmasters (although it helps), but just things like reviewing what worked the prior week/month, what tweaks you make to your pitch, etc. The best brokers always seek to improve, and this starts day 1 for most. Finally, most rookies know nothing about the investment world or their firm's products, so the balance of your day will be spent learning about investments, either via studying for an exam (CFP, CFA, CIMA, etc.), doing research on your firm's internal platform (likely on their managed money products), or something similar.

So there you have it, PB & PWM and the lifestyle of a broker. Fire away with questions!

Final post will be a compilation of misconceptions about my business unless I get some specific requests for another topic.

Comments (61)

Jul 24, 2014

Thank you so much! Couldn't wait for this to come out.

Jul 24, 2014

Good post.

I always wanted to work for C. Hoare & Co and WSOers thought Goldman was tough to break into.

Best Response
Jul 24, 2014

As someone who is an analyst in PB at a BB you mentioned, I can also add that it is MUCH more desirable to break into this side vs PWM. They have established analyst programs and career paths (like other divisions in a BB), and you move analyst->associate->VP, and analysts start at $70K base with $10k sign on. The training programs are also significantly more robust, because it is paid for by the BB, not the broker team like in PWM. The incoming global PB analyst class each year at my bank is close to or over 200 kids.

Another huge difference is that because the clients are clients of the firm, not the relationship manager, you don't get paid by just having a big book. You get paid each year on the delta in your revenue. So a relationship manager can have a cover a big book of business (say the book generates $10MM/yr in revenue), but if their YOY revenue is flat, they don't get much of a bonus. On the other hand, they have a pretty good base salary based on title and tenure, so that is why the discretionary bonus is largely on growth.

I would agree with you, but then we'd both be wrong.

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Jul 24, 2014

Thanks for adding your input into this. You're the PB expert here

Jul 24, 2014

thanks for your comments. I know nothing about recruitment for PB, because that never comes up when we're in competition with PBers. I'll tag you if others have questions I can't answer.

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Jul 24, 2014

Sounds good, happy to share any insight. It's also been interesting hearing about it from the PWM side.

I would agree with you, but then we'd both be wrong.

Jul 27, 2014

@rogersterling59: Would love to hear more insight on PB recruiting. Do you find talent via undergraduate OCR? MBA OCR? Or is it a lot of headhunting from PWM classes or analysts from other bank divisions? How difficulty would it be to break in as an entry-level professional / recent graduate?

@thebrofessor: Great post as always. For individuals interested in working in PWM / PB, what would you say are the best things we could be doing right now to prepare? The prep process for careers like management consulting and i-banking are pretty cut-and-clear (practice case studies for the former, learn your valuation techniques and study the WSO/BIWS guides for the latter). In terms of wealth management, though, there is no site, guide, etc. that explains how the process works. Is this because there's way too much variety from firm to firm? What are they specifically looking for in a new hire? If I don't have any good connections to the HNW community, what redeeming qualities might cover for that?

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Jul 28, 2014
chicandtoughness:

@thebrofessor: Great post as always. For individuals interested in working in PWM / PB, what would you say are the best things we could be doing right now to prepare? The prep process for careers like management consulting and i-banking are pretty cut-and-clear (practice case studies for the former, learn your valuation techniques and study the WSO/BIWS guides for the latter). In terms of wealth management, though, there is no site, guide, etc. that explains how the process works. Is this because there's way too much variety from firm to firm? What are they specifically looking for in a new hire? If I don't have any good connections to the HNW community, what redeeming qualities might cover for that?

1. get educated in capital markets. read commentary from the big guys, read all of the classic books, listen to bloomberg radio, etc. you need to have an answer if clients call saying "what the hell is the market doing today?"

2. practice selling. you can do this through toastmasters or some other way. the important thing is you need to be good enough at presenting under stress that you won't freak out and want to leave the business the first time a millionaire tells you to fuck off (because it will happen).

3. consider CFP/CIMA/CFA. if you're young (under 40), acronyms after your name will help street cred. most people have no idea what they mean, but it's a psychological thing. I think the importance of these in PWM is overstated, however.

4. invest your own money. there's no better teacher than making some really stupid decisions with your money. I'm not saying you need to go bankrupt, but you need to make sure you are emotionally suited for investing other people's money, and if you can't invest your own money and sleep at night, how can you expect to invest for others?

5. read industry publications. most are smut, yes, but if you know nothing of the business, all of it will help. things like WSJ Wealth Advisor: http://online.wsj.com/public/page/wealth-managemen..., Think Advisor, Registered Rep, InvestmentNews, FA IQ (http://www.financialadvisoriq.com/), etc.

6. get involved in the community, but not just for networking purposes. get involved with an organization that has rich people or the potential to have connectors (people who know rich people) and is something that you care about. you should join an organization that you would've joined even if it had no potential to get you business. the idea here is to get out in the community and to have people you can call to get advice from when you enter the business. not necessarily to ask them for their business (although you eventually should), but to have them connect you with people who you could potentially work with.

on redeeming qualities: the #1 thing PWM recruiters (usually sales managers from your firm) look for is selling skills. you can be an investing putz to begin with but if you can sell, you can make it. if you get involved in an organization, a great way to help polish your selling skills is to help them with fundraising. cold calling in the brokerage business and telethons for a charity/political organization are the same thing: you're calling strangers and asking them for money. if you can do a few of these and do well, your phone skills will be leaps and bounds ahead of your training class peers.

finally, the variety isn't in the firms, it's in the fact that since PWM is so entrepreneurial, there's no right or wrong way to build a business, so there's no real "guide." the closest I've ever seen to a guide is this book, but it's not gospel. this book was written what seems like eons ago, but some of the lessons hold true today.

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Jul 24, 2014

thanks @"thebrofessor" !!

WSO's COO (Chief Operating Orangutan) | My Linkedin

Jul 24, 2014

my pleasure Andy, will try to get part 4 up within 3 weeks.

Jul 24, 2014

great, pm me when it's up :-)

WSO's COO (Chief Operating Orangutan) | My Linkedin

Jul 24, 2014

Awesome insight.

"Where is Knight?"

Jul 24, 2014

rogersterling - did you do traditional OCR to get into PB? What was your experience in terms of who recruits heavily and where? what was your academic background?

"Now go get your f'n shinebox!"

Jul 25, 2014

Great post, thoroughly enjoyed your PWM blog series so far. Look forward to pt 4

Jul 25, 2014

Great post, thank you for it!

Jul 25, 2014

Just interested, did you consider other aspects of finance before entering PWM?

"Everyone has a plan until they get punched in the face."

Jul 25, 2014

yes. I entered PWM for the autonomy, meritocratic nature, lifestyle, and other reasons. all of that being said, while I probably could've worked my ass off to get into IB or ER, I would've had to do back office for a few years and then work my way up, and I wasn't as interested in that as I was in being involved in investments but having close to 100% control over my workload & life.

Jul 25, 2014

As someone in the industry, this post spot on.

Jul 25, 2014

Could you describe your portfolio construction process? Do you build portfolios for each client or do you use allocation models?

Do you pick your own stocks/bonds or do you rely on outside managers (mutual funds & SMAs)?

I work for an Asset Management company and we deal with all the major PWM and PB firms. Every firm and team operates differently so it would be interesting to hear how you handle portfolio construction.

Jul 28, 2014

we build them for each client, but with every good PWM team, you will have the same models just in different allocations. so while it's rare that 2 clients with similar circumstances will be 100% identical, they will usually have the same ingredients (managers, models) in their portfolios, just in different allocations.

on stocks/bonds v. managers: we have both. for example, I run a US biased individual stock portfolio where it's all our own ideas, but we use a lot of managers, especially for asset classes we aren't experts in (alternatives, high yield, international/EM). most of the time, we have our individual bonds managed, especially munis. there's a ton of reasons why outsourcing bond management makes sense, but I won't bore you with that. in some cases, it makes sense for us to pick, but most of the time we outsource it.

I think it's silly to think that one broker can be good in all asset classes AND be a good advisor to clients. it's fine to know 1 or 2 asset classes really well, but there's a reason why all of the major AM companies have specialists. any broker who tries to tell you he does it all means he's broad & shallow in knowledge, meaning he's ok at everything but good at nothing. every broker should be able to talk intelligently about the major asset classes, but no one should actually think they can manage every single asset class without help from outside managers/analysts.

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Jul 28, 2014

Awesome - exactly what I needed. Thanks for all your help!

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Jul 28, 2014

Another spot on post. Thanks for the read!

Jul 29, 2014

Thank you for sharing! Would you happen to know if Merrill Lynch is closer to the PWM or the PB style you mentioned? If you would, can you talk about the ML PWM (specifically the PMD program if you could) in terms of how 'sticky' the clients would follow them, the team structure (are they out on their own or they have a team behind them with 'farmers' and 'hunters' role), and the lifestyle. I know this is very specific and may even be an ignorant question, but I will appreciate any information!

Jul 29, 2014

Merrill is PWM in the truest sense, this includes Merrill PBIG (private banking & investment group). Anything PWM is not going to be sticky to the firm (most likely), because in that model the clients are in most cases more loyal to the advisor versus the firm. most advisors who move firms retain 80-90% of their good clients if they're good.

here's the deal: with any firm that's PWM the firms will all look pretty similar on the outside, but the differences lie in the individual practices. my practice is completely different than the team down the hall from me, yet we're at the same firm, same locale, same office. so questions about lifestyle, structure, roles, they're impossible to answer because every practice is different.

Jul 29, 2014
thebrofessor:

here's the deal: with any firm that's PWM the firms will all look pretty similar on the outside, but the differences lie in the individual practices. my practice is completely different than the team down the hall from me, yet we're at the same firm, same locale, same office. so questions about lifestyle, structure, roles, they're impossible to answer because every practice is different.

This is spot on. It is impossible to predict how you are going to run your own outfit in PWM. Just reading the brofessor's structure above, my group's is significantly different.

If you want more structure, private banking or the investment management groups within the brokerages is more of your thing.

Jul 30, 2014

Thank you so much for your prompt reply! And to follow up - what do you recommend for rookies who don't have a rich uncle to develop a book of business in the shortest possible time? I know you mentioned going to certain social/networking events and joining interest clubs - but is there any other way to break in and expand the client groups?

Also any heads-up on bringing up your intention to help them manage their money when you are talking to a friend/club member/acquaintance?

Thanks!

Jul 29, 2014

for someone interested in managing money and being much more involved in the investing side, and less so managing clients, should they be looking into AM/HF industry or the PB/PWM industry? What are the perceivable differences between the two for someone interested in pure play investing?

I can imagine that some people out of grad school MBAs are able to land seed money from close friends and generous donors say many of the hedge fund elites started like this). Why didn't they form their own PWM practice versus going out and sticking to a principle (long value/distressed value) and investing hoping others would seed more money? Seth Klarman and Bill Ackman come to mind as examples.

Thanks for the write up, immensely helpful

Jul 30, 2014

if you want to have an immediate impact into the investment decision making process, you need to be a research analyst in AM/HF, your work will go directly to the PM who makes decisions on investments. in PB, you will likely not get input right away, and most PB operations do little to no original research. PWM similar type situation, except analyst positions are few & far between.

the difference between HF and PWM is huge, hedge funds have assets without daily liquidity, meaning they can invest according to their strategy without having to deal with daily withdrawals, spending needs for investors, etc., so they are for the most part unencumbered by the needs of their investors. this means you can invest with a longer time horizon for your catalyst to take hold, can control when you distribute cash to investors, and so forth.

PWM is more like endowment management, where you try to manage around a spending policy. now all of our clients want growth, but what's more important is maintaining their lifestyle and not losing money, versus absolute return like Klarman or Ackman.

for whatever it's worth, those guys make way more money than any top broker. I'm looking at the Barron's top advisors and the top guys have between 5-30bn in AUM. even if those brokers are the creme de la creme, their ROA is not going to be higher than 60bps. going by this math, the max you could possibly have in fees is 180mm. Take a firm like Baupost, they probably have a 2 & 20 or 1 & 30 fee structure. if it's 2 & 20, they have 30bn in assets, that's 600mm in fees, not counting performance fees. if Klarman returns 10%, that's another 60mm in fees. Ackman has about 13bn in AUM, so 2% for him is a bit smaller at 260mm, but that's still way bigger than any PWM guy would ever get.

the reason is because of ROA. PWM guys have a much lower ROA than HF, and the higher in assets you go the lower your ROA gets, so you will never get hedge fund PM comp if you're in PWM. but then again, VERY VERY VERY few people ascend to Seth Klarman's level, so I'd argue that getting within earshot of his fund is just as difficult as getting $1bn in client assets in PWM.

Jul 31, 2014

Having read your series of wm posts, I am still unsure of the best path for someone coming out of undergrad. You elaborated on how there is no true path, but I was wondering what you think about someone fresh out of undergrad taking a position in a wealth management analyst program such as Morgan Stanley or Goldman Sachs? I know the structures are probably a bit different but is this a good stepping stone toward becoming a wealth management associate/ advisor (becoming a producer)? I would ultimately like to become an advisor but I am also a realist in that even some of my richer relatives would probably laugh at me if I tried to get them to let me handle their assets with only a handful of internships and a college degree at age 22, let alone a hnw individual that is a complete stranger. Thanks in advance for all your posts and help, this series has been excellent.

Aug 1, 2014

from what I've heard, these programs are great and will give you a good introduction to the business, the downside is you won't be exposed to high earning wealthy people you can call on when you leave. unlike the sell side of a firm like Morgan Stanley, the higher ups at PWM home office will not be as wealthy. now I'm sure the tippy top will be highly compensated, but much less so than somebody in IB.

if you want to be a broker, what I'd do is enter the analyst rotational program, learn the business, perhaps sit for a few CFA levels (don't know if you can do CFP if you're not a practicing broker), get involved in your rich relatives' charities and extracurriculurs (meaning don't just pay dues, actually get involved), meet people, and do this for several years. if you end up wanting to make the change to become a broker, you have an existing network of people you can call on Day 1. this is not fool proof and it will definitely be difficult, but the key takeaway is do NOT become a broker as soon as you graduate from college, you will fail.

Aug 1, 2014

Thank you that was the exact type of information I was looking for. Appreciate all your work and commitment to helping us understand the pwm business.

Aug 1, 2014

What are your thoughts on institutional equity sales -> pwm? Would it be better to just go into pwm investor side and maybe move into a broker role from there?

Aug 4, 2014

From my experience beginning in the PWM world directly out of college and then transitioning to a PB associate program and then to a PB relationship manager role, I can say that getting starting on the PB side is much easier. PB removes the necessity to have an established network and provides stability while you learn the business. I would highly recommend getting into a PB analyst program if you want to get into this industry directly out of college.

Aug 16, 2014
Randy Quaid:

From my experience beginning in the PWM world directly out of college and then transitioning to a PB associate program and then to a PB relationship manager role, I can say that getting starting on the PB side is much easier. PB removes the necessity to have an established network and provides stability while you learn the business. I would highly recommend getting into a PB analyst program if you want to get into this industry directly out of college.

What are some firms with well-established PB programs that you'd recommend?

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Aug 18, 2014

A few that I am familiar with are JP Morgan's Private Bank program, PNC Asset Management Group's program, and Goldman also has a development program for their PB. I am sure there are good programs out there, but these are three that I have knowlege of and have heard good things from.

Aug 9, 2014

Wow your thread is just full of surprises, even in the comments - I just keep learning stuff. Thank you for answering my questions. I would like to have you clarify two points:

1. if only 5% of the time is on investment, does that mean you spend most of your time on building your client book, i.e., networking and cold calling?

2. if you don't suggest fresh graduate go in pwm as a broker, what's your opinion on a 23-year-old-straight-out-of-college joining the PMW program in Merrill Lynch? Is it a good program that helps you become a financial advisor eventually? It does sort of nurture you into it in the way you recommended - it provides training to get your familiar with the business, pushes you to get CFA, however, it requires you to start 'hunting' after a couple months in the program. Do you have any comments/heads-up on this structure/path of becoming a broker?

Thanks!

Aug 11, 2014
Michstery:

Wow your thread is just full of surprises, even in the comments - I just keep learning stuff. Thank you for answering my questions. I would like to have you clarify two points:

1. if only 5% of the time is on investment, does that mean you spend most of your time on building your client book, i.e., networking and cold calling?

2. if you don't suggest fresh graduate go in pwm as a broker, what's your opinion on a 23-year-old-straight-out-of-college joining the PMW program in Merrill Lynch? Is it a good program that helps you become a financial advisor eventually? It does sort of nurture you into it in the way you recommended - it provides training to get your familiar with the business, pushes you to get CFA, however, it requires you to start 'hunting' after a couple months in the program. Do you have any comments/heads-up on this structure/path of becoming a broker?

Thanks!

1. yes

2. I consider 23 still straight out of college. I'm thinking 25-27 is about the earliest you should think about doing a program like the ones at Merrill, MS, or UBS. the programs at those 3 will look identical, though Merrill is trying to revamp the whole thing and aims to get rookies hired directly onto teams, and the jury's still out on whether or not that program will work. candidly, I don't think the demand is there (at any of the firms), but we'll see, I hope I'm wrong.

as for how I feel about the program, the programs at all of those 3 firms are identical, don't have anything more to say about them than what I've written in the 3 blog posts: they're insanely tough, do not give you good education on investments (meaning you should have this when you enter the program), do not teach you much about how to sell (in my opinion), etc. all 3 of the firms will tell you they do this, and I'm not suggesting that they give you a phonebook, a phone, a pat on the butt and say "go get em tiger," but I think it's impossible to think they give you all of the tools you need in the 3-4 month period you have to "learn the business" before you have to start hunting.

think about it like this: you come in as a 23 year old with no financial education beyond a 300 level capital markets course and some classes on theoretical finance perhaps, but you will maybe use 1% of that knowledge when you're a broker in the early years. what you need to be able to do is find people who want & need your services, be able to ask the right questions so you can uncover where you can add value, and be able to make a recommendation on what they should do to improve their situation and how you can do that better than anyone else.

you have 3-4 months to learn how to do that well enough to be able to survive. on top of that, you have to learn your firm's computer system, get your 7 & 66, get insurance licensed, learn your firm's platform (you have to know what you're going to recommend, right?), and build a database of people you're going to contact. it's a huge mountain to climb, and I would think very long and hard about committing to that at such a young age. if someone were to come to me and ask how to do it without going into a different business first (PE, IB, HF) and without the support of a team, wealthy family, etc., in your 20s I'd say become a senior broker's assistant for several years, learn the business, get licensed, learn about how to recommend stuff (you'll pick it up, trust me), and start networking early on. after 3-5 years, if you're not a putz you should know enough to be able to talk to strangers intelligently, and worst case scenario you're not a complete idiot when you start cold calling, but best case scenario a team within your office sees your promise and hires you to be a junior broker.

did that help?

Aug 15, 2014

Thank you very much! It helps tremendously.

Aug 16, 2014

So instead of the financial advisor training programs, what do you think about joining a PWM or PB group as a CSA and working your way up from there? How quickly can you go from CSA to RM?

EDIT: Another question. Do you find that lower-level PBers (CSAs, Inv Analysts, etc.) have to put in more outside-work hours? i.e. is the "schmooze or lose" culture of brokerage financial advisors also applicable to PB? I know there will inevitably be prospecting / calling new clients as part of the job, but will you constantly have to attend networking events, seminars, conferences, and the like to actively scope out new clients?

Simply put, I'd like to have at least a few hours to myself in the evening. The eternal problem of an introvert :(

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Aug 9, 2014

So how does ML Wealth Management compare to ML PBIG?

Next stop: Flavortown!

Aug 11, 2014
jdubh5401:

So how does ML Wealth Management compare to ML PBIG?

effectively the exact same thing but PBIG has higher minimums. as you might imagine, with higher minimums comes more avg assets per client, lower ROAs, etc.

Aug 20, 2014

okay great, thanks for the reply! now imo it seems that ML WM is more well known than PBIG, but is one more prestigious than the other? how does PBIG compare to other BB private banks?

Next stop: Flavortown!

Aug 15, 2014

did you follow the 500 day war for your cold calling?

Aug 18, 2014

not enough time to talk this through in complete detail (nor do I think anyone here's all that curious), but simply put: no. for so many reasons, no one at the big 3 does this and makes it, if for no other reason than no millionaire will open an account with you on the first phone call, period.

Aug 18, 2014

Great. Thanks again all of you and sorry for all the naive questions.
Just trying to do my due diligence before I decide to hop into the industry ;)

Currently: future psychiatrist (med school =P)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Sep 16, 2014

If you are a member of the team that is not the relationship manager, how is the comp structured? Is the relationship manager the one that directly gets paid based on fees/commissions for AUM and is the rest of the team just salaried? and how different is your role when your a PM on the team vs the Relationship manager?

Sep 17, 2014

Short answer: read part 1 of my blog. All comp is divvied out by the pool of revenue generated by clients. The brokers who are pounding pavement, closing business, etc are going to get the lions share. If the team has a pm, their comp will be salary plus bonus most likely, but it all depends on the team.

Roles vary from team to team. There are some where a pm is a true pm, rarely meeting with clients, purely managing money. Others (like me) are more hybrids, we spent a good portion of our time on both relationship management/marketing and on managing assets. You've got to remember that in pwm (not pb), the roles are fluid because you're allowed to structure your practice however you want.

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