Times are tough
Tough for everyone and tough for stock brokers who are reeling from both the nasty performance of the stock market over the past year and from structural changes in their business. So far this year (May 2009), over 17,000 brokers have left the profession which would equate to 35,000 exiting the business by year’s end (2009). That’s almost 6% of the entire field opting out.
Taking stock and figuring out what to do
Become a franchise player
So, what’s a broker to do? If you’re at the top of your field (generating over $1m+ in fees per year), there is heated competition for your skills and you should find numerous firms looking to pick you up on sweet terms. In this case, become a franchise player.
Planning your next move
If you’re not there yet (ie. generating less than $250k in fees) and still employed, it’s probably worthwhile making a game plan about what to do next in your career. Change is prudent and sometimes necessary, so have a plan. You planned your clients’ moves involving lots of money. Pretty high stakes. Your career is too and requires the same type of oversight right now.
I think a broker’s career management decision tree is pretty simple at a high level right down and it centers on two options: do I stay in the business in some capacity or do I find a new field of employment?
Stay in business vs. Find a new field of employment
Stay in business
- Switch brokerage firms: huge finders fees and great incentives. If you are a big or even medium sized producer, you’ll find better payout rates at many firms.
- Become an Registered Investment Advisor (RIA): Join another firm, start your own. The business is headed in this direction anyway — away from commission-based advice. Many have left the wirehouse world and have started up their own advisory firms. Start one yourself and bring your clients with you or join another firm and leverage their startup costs.
- Find another role in brokerage/advisory world: When I was an analyst at a hedge fund, we had someone whose sole job was to help the funds under management locate borrowable stock to short. He wined and dined his prime brokerage relationships and enabled the fund to make a lot of money because we could get our hands on stock to short while others could not. Similarly, lots of hedge funds need help with back office functions or client management (aka bringing in investment dollars). If you have a strong book of business, help raise money for startup hedge or mutual funds.
- Find a different way to monetize your skills: Jim Cramer is no longer a money manager. He’s a media personality and he butters his bread by being entertaining and teaching millions of people about investing. He is a credible source of information (whether you like him or not) because he has such great institutional experience. He is entertaining and has helped excite millions of investors. Others have created financial newsletters to sell on the side. Others have created trading systems for do-it-yourself investors. Still others aren’t quite sure where all this is leading and have started blogging to begin building an online reputation. Use SeekingAlpha to help showcase your skills.
- Become a recruiter: Sound strange? Nah, Heidrick and Struggles, one of the leading executive recruiting firms really grew from its financial services practice. Times are tough but recruiting requires very little sunk capital, a phone, computer and a rolodex. Close a couple of searches and that can make your whole year.
- Become an expert: Slow times create opportunities. Take this time to rebrand yourself as an expert in something. Anything. Maybe it’s wealth transfer. Maybe it’s tech stocks. Anything that can differentiate you from your peers will pay off. Participate with your expertise up in an expert community, like Covestor. Show off using social media, like Twitter.
Change fields
- Find a business development/sales position: Like making deals? Once outside the financial industry, you can use your ability to close and speak persuasively to help build companies, partnerships and sales. Media companies are hiring (NOT newspapers).
- Start your own franchise: Find and research franchise opportunities. Franchises allow you to run your own business but with corporate backing. It’s a great way to begin a new career for someone who wants to be their own boss and run a restaurant, dry cleaning, office supply store, whatever.
- Join a non-profit: Non-profits are suffering. Rainmakers are having a hard time luring fresh funds in a down market. Your book of business and rolodex may make a great partner working with a nonprofit to make a difference. You won’t know until you try.
- Dabble in real estate: You know rich people. You know people who are looking for opportunities. There are always opportunities looking for rich people. Be the matchmaker.
- Try something out of the box: Check out US News 30 Best Careers for 2009. They’re quite different than what you’ve been doing up to now. There’s no better time to redefine yourself than right now. Ghostwriting is up there — if you like writing and are good at it, take a stab at helping to write a business book for a colleague.
Distress creates opportunities. Financial advisors and brokers are facing the double-whammy of a shrinking asset pool combined with an industry that is changing quickly in the face of increased regulation, more competition and further disintermediation by the Internet. You can take this time to make yourself more competitive when the economy picks up or opt to do something completely new. Brokers have access to investment money, understand financial products and know a thing or two about client service. Put those to work in something that’s going to both spiritually and fiscally rewarding.
