Yesterday I had a client meeting with people that have been with me for a while. I have one big piece of their investible assets and another big chunk is at UBS with a broker. The client mentioned that the UBS account is now all cash because the broker doesn't have much feel for the market right now. The client asked me I felt the same way. "No I don't."
The client conceded that I am much more on top of things than their broker.
I also got a call yesterday from my friend who is salesman at a big bank. We were talking about another salesman for the bank in my area who apparently has about 1000 clients. My friend said the guy probably can only talk to 200 of them. 200? I say no way.
In trying to address retirement issues and who, if anyone, should help you manage your portfolio I hope to point out how unlikely it is you will find someone at a bank or brokerage that actually has time to manage your account.
This is not a pitch for anyone to hire a separate account manager. Manager's like me are not ideal for everyone, far from it. What this post is, hopefully, is a wakeup call for people that use brokers or salesmen at the bank and think their account is being looked after.
Ask your broker how many clients he has and then do a little math. A salesman successful enough to be in the business a while might have 200 clients. If he works 50 hours a week you can assume he spends at least half (probably more) of his time trying to bring in new assets. There are always multiple sales meeting in a given week so maybe 20 hours can be spent actually tending to client nest eggs. That averages out to six minutes per client per week or if you prefer 78 minutes per quarter.
Is that enough time?
A salesman has to make sales. The path of least resistance is to put client money into some sort of auto-pilot product that needs minimal follow up. I am amazed by how few people realize this. I have looked at statements of accounts managed by friends and it is no different.
The evolution of the investment industry makes it easier for people to do it themselves for a lot less money and come out no worse off than they'd have been with their broker.
I won't say better than with their broker, that has to be earned and or learned.
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3 comments:
The tool for a broker to move a client to all cash is fear. The move reduces the probable return for the client but it produces two 100% portfolio turns for the broker; one commission on the entire account to sell-out and another buying back-in.
This is good news to hear for the contrarians among us. It is equivalent of a market that is heavily shorted. Should the market break-out, this guy will need to put a lot of money to work at higher prices.
Corporate buy backs have broken a 16 year record this year. Corporations are sitting on piles of cash and there are countless clients who are all cash. What would happen to the market if oil drops to $45 and the CRB were to drop by 20%? The inflation fear would be dead. Ten year bond rates could drop to the low three's. This guy would not know what to do when stocks jump 15% in a month or two. He would probably sit out the next 15% move as well.
Thank you as always for bringing good information to the blogosphere.
Roger, are all of your accounts completely different? I ask, because if one has 1000 clients, but 70% of their assets are invested in the same names, just different percentages, then the 1000 ARE being looked after. YOu assume that each of the 1000 has holds completely different names.
...If someone has 1000 accounts, and each one has a position in EFA, watching EFA counts in each of the thousand. It doesn't go up in one account and down in another, so that each has a different investment experience....
George,
My accounts are very similar but not identical. On the equity side I have an "ownership universe" of 60 or so individual stocks and maybe 15 ETFs.
I haven't heard of someone at a bank or brokerage buying, as in your example, EFA for everyone. Usually it is a collection of various products.
I'm sure there are exceptions out there.
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