Top brokers have a lot in common with the best high school students — both often aspire to positions at prestigious institutions.
But just as Harvard is not the best place for every high school valedictorian, private client groups at Goldman Sachs or JP Morgan are not always the best places for an advisor focused on ultra-high-net-worth clients. Indeed, for many successful brokers, a focus on “ultra” clients — defined as households with $5 million in investable assets — might not even be a smart move.
Annual gross production of $1 million or more attained in a relatively short time (five years or fewer).
A completely clean compliance record and come from a top-tier firm and fit the hungry and highly successful model of a broker who ramped up to success very quickly.
For example, even a broker with $1 million in annual gross production but who took 10 or more years to get there probably will not make the cut at Goldman Sachs. Their reason for rejection: The broker is not hungry enough.
Even more sobering is the way Goldman's rules can affect brokers financially. Newly hired ultra-high-net-worth brokers with books made up of a mix of ultras and sub-$2 million clients will be forced to give up their “less than” clients. This is a hard earnings hit for many brokers to absorb. True, those lost accounts can quickly be offset with the earnings from new ultra clients, but landing these clients is no cakewalk. There are only so many people walking around with $25 million to invest, and advisors who have these clients are not easily dislodged.
Indeed, the investment needs of ultra clients can be met at just about every wirehouse firm, including UBS, Wachovia, Merrill Lynch, Morgan Stanley and Smith Barney.
“My brokers are working with ultras who have investable assets in excess of $50 million, providing estate planning, tax planning, wealth-transfer strategies and sophisticated lending programs, as well as the traditional products and services available on a retail platform,” said one manager at a bank-owned firm.
Equally important is the breadth of services and products offered by the wirehouse firms. “The well-rounded retail platforms we offer are not available at the private banks and other firms that service only the ultrawealthy clients,” the manager said. For instance, the lending products available at a bank-based firm are very important in acquiring and keeping ultra clients.
The manager added that compensation is greater for brokers at his firm than at firms whose names might carry more cachet. Indeed, brokers do themselves and their careers a disservice when they accept a job at a firm that treats them like second-class citizens.
In addition, the mere mention of a prestigious firm's name is not always the ticket to an ultra's business. Unless the broker is from a wealthy family or inherited a book of business filled with ultras, he likely didn't start out with such clientele.
As such, most brokers can enhance their careers and their bottom lines by making appropriate moves between wirehouses, receiving transition packages along the way. There are many ways to accomplish this, but it starts with a broker educating himself about the realities of career moves, then moving on from there.