Prime Brokerage Stories: Letting Go of the Past

This is the fifth in a series called “Prime Brokerage Stories,” real life experiences from a close family member who worked in this area of the Street for 30 years. For an introduction to PB so it all makes sense, see here: //www.wallstreetoasis.com/blog/what-is-prime-brokerage

Our prime brokerage group handled not only prime brokerage clients, but also other more ‘sophisticated’ customers. This included proprietary trading for smaller broker dealers, who at least thought of themselves as professional traders.

These broker-dealers are known as ‘introducing brokers’ (“IBs” to us guys who worked at a clearing broker dealer). I believe the name comes directly out of the regulatory statutes which refer to them as ‘introducing brokers’.

In any event, that’s what it’s called when a broker dealer trading stocks, commodities, etc. does not clear their own trades.

In the early 90’s the IB business was considered to be a parallel business to prime brokerage, but the firm I am referring to for this story (a blue chip broker dealer) exited the business later on, after several years. Most likely, that was because the ROE on the business wasn’t what they had hoped for, but I could be wrong.

Our prime brokerage group had high marks for handling the I.B.’s. One day, the guys upstairs decided to ask the PB group to oversee not only the firm’s in-house, proprietary trading, but also the I.B’s customer business, which was mostly the much less sophisticated retail business. Plans were put in place to transfer the retail accounts of one particular IB over to us right away.

It turns out they were transferring to me their worst nightmare account, which we’ll call “Bull Run.”

“No worries,” I was told, “We are transferring the headcount as well [one person].”

The reason was that “Bull Run” (in addition to being one of the Civil War’s bloodiest battles), required constant attention. The IB had been screaming at us for a long time before the transfer and was threatening to move their account to someone else who “knew how to handle their business.” So we needed to stop the bleeding fast, before “Barnum and Bailey” was added to our white-glove brokerage firm’s name!

“Julio” was the one person assigned to cover the Bull Run account. His manager on the operations side (who we’ll call “Mr. White”), informed me we would have to speak about Julio. He had had many issues in the recent past, including some flare-ups that impeded his ability to handle the IB’s and the clients.

So now I was getting a clearer picture – they wanted me to take their toughest account AND their worst employee and just create nirvana. Fortunately, I said “of course!”

Now, let me tell you about “Mr. White.”

He’s a douchebag.

I once went to see Mr. White’s boss to network and get some face time. I’m about to poke my head into his office and say hello, but Mr. White literally steps in the doorway and blocks me from entering.

“I’m just here to see your boss,” I said.

“Well, he’s very busy right now, can I help you with something?” Mr. White replies.

The boss was clearly not in a meeting, or on a call, or doing anything important, and this jerk is standing in the doorway like a German shepherd guarding his master? Buddy, you are a loser. I was definitely not impressed with the guy. I think Mr. White’s arrogance definitely helped me make the right decision for what would come next.

I had a conversation with Julio in my office (nowadays they would call this a ‘one on one’ in HR speak), and I told him how much I needed him to really bring his A-game to handle this big Bull Run account. His support system was gone, because he was now sitting with us in prime brokerage instead of his old department (that’s what the guys upstairs meant by “transferring the headcount”).

Despite Mr. White’s earlier warnings about his “issues,” I actually liked Julio. He was efficient and fun to work with, so I’m thinking that the client probably likes him and he’s probably just tired of being second guessed by a dumbass manager like Mr. White—a guy so paranoid he stands in doorways to block people from escalating things around him!

In any event, when the HR personnel file arrived, Mr. White brings it into my office himself. He goes through this yellow pad with ten pages of notes about incidents where the condemned—sorry, I mean the analyst--Julio, was supposedly negligent in his duties. He leaves the file with me to review and return to HR.

I pulled out all the notes and literally threw them out, right there in the garbage with the remnants of my lunch. What HR got back was a clean file (it was all paper back then-no password needed!).
We did quite well with Bull Run and eventually all the I.B. accounts were put under my supervision.

Julio thrived in his new environment, turned out to be quite successful, and is presently a managing director at a major Wall Street firm.

PB Story 1: “Big Mack and the Phantom Pricing” //www.wallstreetoasis.com/blog/prime-brokerage-stories-big-mack-and-the-p…
PB Story 2: “Thank You, Nick Leeson” //www.wallstreetoasis.com/blog/prime-brokerage-stories-thank-you-nick-lee…
PB Story 3: "Mentally Fired" //www.wallstreetoasis.com/blog/prime-brokerage-stories-mentally-fired
PB Story 4: "Expect No Favors" //www.wallstreetoasis.com/blog/prime-brokerage-stories-expect-no-favors
PB Story 5: "Letting Go f the Past" //www.wallstreetoasis.com/blog/prime-brokerage-stories-letting-go-of-the-…