blog/30 30 30

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:

  1. Opened 30 new accounts
  2. Earned $30,000 in gross commissions
  3. and
  4. 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 President
  • or
  • $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 the Asset Management model 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? An Amazon gift 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.

 

Sounds like I'm a few decades late to the party.

One thing I'm curious about though: why was the turnover so high? It seems like even if a guy didn't do $10MM a year, he could still be living pretty well on a decent amount of business provided he wasn't a shitty stock picker, or am I answering my own question? I'm a bit new to the industry and still learning the backstory, so please pardon my ignorance, but what were the primary reasons people got tossed out of a firm?

As for your book, I'm pretty much dropping everything else to read it when it comes out: if THIS story didn't make the cut, I can't even imagine the goldmine of awesome that you're turning loose on the world

Get busy living
 

@UFO 90% fired themselves when they figured out they just couldn't (or more often weren't willing) to do the numbers. It was a horrendous grind that usually took six months to see your first paycheck. A lot of these kids went to Ivy schools and just thought they were better than grinding it out on the phone all day, every day. I can't fault them for it; it was a miserable slog at first.

Once you were established, though, it was pretty smooth sailing.

 
In The Flesh:
Can't wait for the book, Eddie. I look forward to writing a Monkey's Review for it!
Put that shit on Amazon and I'll write 20 hilarious positive reviews.
If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

I just got a tweet from a former wirehouse broker who informed me that current ROA is running about .42% of AUM for brokers today. In other words, for a broker today to make the same $100,000 we could make with $1 million under management back then, he needs $24 million under management today.

I'd sooner jerk off buffalo for a nickel a herd than work that hard to make 100 grand.

 
Edmundo Braverman:
I just got a tweet from a former wirehouse broker who informed me that current ROA is running about .42% of AUM for brokers today. In other words, for a broker today to make the same $100,000 we could make with $1 million under management back then, he needs $24 million under management today.

I'd sooner jerk off buffalo for a nickel a herd than work that hard to make 100 grand.

There is a guy with an ROA of 137% (on paper) who works in my office and lives next to John Mack. Still happens these days, most people would rather work at a BB and get a paycheck at the end of the week. Than get on the phone.

"The higher up the mountain, the more treacherous the path" -Frank Underwood
 
Best Response

Wow. Here it is broken down in black and white by Scott Bell, a current financial adviser in this great post:

http://iheartwallstreet.wordpress.com/2011/07/08/deflecting-bullets/

Scott Bell:
Did you know? If you have $250,000 with your advisor, on a net basis you are probably paying them about $100 dollars a month to help you manage your entire financial life and be able to wrangle you to the ground every time the mental math starts working its magic on your sweet little head. $100,000 portfolio is $41 a month. How much value are you expecting? You have a million? That’s probably paying them about $300 a month, which buys you a bit more latitude. And that’s before taxes or healthcare.

Even still, with me as your trusty financial sidekick, you continue to subscribe to three different newsletters that have three different takes on the world, and you favor a different one each month & then call me on a whim to ask my opinion of the next exotic idea of the month. And I’m supposed to provide a thoughtful answer, without insulting you. And somehow I’m also supposed to manage my day effectively dealing with 100 other clients just like you.

Anyone considering getting into the Asset Management or PWM racket should read that post NOW.

 
Edmundo Braverman:
Wow. Here it is broken down in black and white by Scott Bell, a current financial adviser in this great post:

http://iheartwallstreet.wordpress.com/2011/07/08/deflecting-bullets/

Scott Bell:
Did you know? If you have $250,000 with your advisor, on a net basis you are probably paying them about $100 dollars a month to help you manage your entire financial life and be able to wrangle you to the ground every time the mental math starts working its magic on your sweet little head. $100,000 portfolio is $41 a month. How much value are you expecting? You have a million? That’s probably paying them about $300 a month, which buys you a bit more latitude. And that’s before taxes or healthcare.

Even still, with me as your trusty financial sidekick, you continue to subscribe to three different newsletters that have three different takes on the world, and you favor a different one each month & then call me on a whim to ask my opinion of the next exotic idea of the month. And I’m supposed to provide a thoughtful answer, without insulting you. And somehow I’m also supposed to manage my day effectively dealing with 100 other clients just like you.

Anyone considering getting into the Asset Management or PWM racket should read that post NOW.

Wow, so, I'm thinking that moving up the AM food chain isn't worth it. Ouch.
Get busy living
 

Great post, thanks for sharing. I like the little history lesson about how managed money was a joke and how each broker was essentially running their own fund. Quite a contrast to the asset allocation model of today while getting pennies on your AUM.

 

I agree with you when you say mutual funds fucked everyone. Not that I was working in the industry when you were, but those fuckers called me all the time wanting to do a 401k for my company. Every time someone wanted to talk to me on the phone about it I wanted to reach through the phone and strangle them.

Follow the shit your fellow monkeys say @shitWSOsays Life is hard, it's even harder when you're stupid - John Wayne
 

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