The Investment Scientist

Posts Tagged ‘morgan stanley

Morgan Stanley Smith Barney

Morgan Stanley Smith Barney

I went to a Morgan Stanley financial advisor associate recruitment meeting recently to spy on how they train their new financial advisors.

They have an extremely rigorous 36 month program. New associates are expected to pass series 7 and series 66 license testing in the first 12 months. These licenses enable them to charge both fees and (hidden) commissions. (Comparatively, my series 65 license prohibits me from charging commissions.)

As soon as they get the licenses, they are expected to go into “production.” The firm sets very tough production targets. If they fail the targets, they will be kicked out of the program.

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Morgan Stanley Smith Barney

Morgan Stanley Smith Barney

Last weekend, I went to New Jersey to meet a potential client who is an executive at a pharmaceutical company.

He told me that, as part of the executive benefit package, the company refers executives to Morgan Stanley where they get “free” financial advice. I smirked and said: “Well, we will find out how free it is. One thing I know, though, Wall Street firms are not known for charity.”

It turns out that Morgan Stanley advised him to open several, separately managed accounts (SMA), each with a management fee of 1.5%. The reason for the multiple accounts?

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Last month, I was approached by a plastic surgeon whose money was with Morgan Stanley Smith Barney. He was looking for someone who could beat the market: not just promise to beat the market, like his financial advisor, but actually deliver.

I told him that I can’t beat the market, I can only help him capture the market. I could see a wisp of disappointment flash across his face.

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and this will happen.

What will happen to your money if you hire a salesman as your financial advisor

What will happen to your money if you hire a salesman as your financial advisor


Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC.

Twitter: @mzhuang

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