What? We don’t do that do we?

I am a registered rep with a very large, very powerful and very intimidating bank.  Our CEO is currently America’s favorite boy toy CEO.  This piece is basically a retort/I kinda agree with piece to the recent post  entitled “Does your stock broker know more about investing than you do?” by Mariusz.

I will put all cheeky humor aside and say that he was very correct.  Please give me a chance to elaborate. Being that I am a registered representative with a very powerful financial services firm I see many interesting and silly things. Not too long ago we had a rep leave the firm for a new firm because they offered him more money (the nerve of this guy) so our IM (Investment Manager) came to the office along with the new rep who would inherit his book of business to make sure that the money hungry old rep wasn’t stealing the big fancy clients.  While we were making phone calls and whispering sweet nothings into the gold plated ears of our clients, a funny looking man with a walker and a floppy hat walked in.  He kinda looked homeless so most people didnt really think he was in the right place. One of the reps asked if he was looking for the “Dialysis clinic” down the street.

He looked up and said with a funny little stutter “No no n n n no, I want to talk to some one about equities”.

What? Equities? Regular people don’t use the word “Equities” only super smart people with money and Reps who scored a 89 or higher on their securities exams.

So I stood up and said “Sir come on over here”.

He slowly made his way to my desk (where the magic happens), sat down and let out a sigh of relief.

I said “how can I help you sir?”

He said “well I have a trading account at Scottrade and am interested in moving that account to your firm”.

“Sounds good sir, what type of balance do you typically keep in that account?”

“Well its um, something around, maybe a little less, maybe a little more, the balance changes due to my holdings,  I would just say that its 50K.”

Now if you’re not in the business you may think 50K isnt that much. However I would say since my incentive pay is determined by an extremely confusing construct of matrices and formulas, 50 K is beautiful. So as I began the process of getting to the know the customer he begins to talk to me about his holdings and why he chose them. I was very impressed by his understanding of the investment world stocks, dividend yield and all that super good stuff. Now before you write me off as a slacker, let me tell you that I was the kid reading the prospectus  for Dreyfus funds in my bedroom while you were reading the March 1987 issue of Playboy you found in the alley. In short, this little poorly dressed man was speaking my language. I thought he may have been an investment angel sent to test my insight. As we continued on I filled out the ACAT form and set a follow up meeting. When the customer came back in we had finished the process of moving his funds to our firm, so he then began to ask me about specific stocks he was interested in. We did some research and found the stocks that we both agreed were best for him. The customer then begins to ask me about margin and continued on saying that margin was very important to him. As I pointed my mouse to locate the margin form I found that this form was no longer available on the system, so being the industrious Rep that I am I asked the IM  (Principal) (My Boss)

I will call her Carmen to protect her identity and allow me to actually use the name Carmen in my post.

“Carmen, the homeless guy who is really smart and knows about investing wants to add margin to his account, I cant find the form for margin on the system.”

“What? He actually opened an account?”

“Yeah he had a few bucks over at Roger Rineys firm.”

“Ok, well what does he want to do?”

“I just told you, he wants margin on his account.”

“What? We don’t do that do we?“

I almost lost my breath.

“Carmen are you serious?”

She just stood there and stared at me.

I said “of course we do margin, we are an investment firm a very large, formidable investment firm!!! “

“Well I don’t know how to do that.”

“Carmen you have been with the firm for 15 years, you don’t know how to add margin to a customers account?”

“No, just call support.”

At this time the rep she was working with said “yeah man we don’t do margin, what does he want to do with margin?”

I gasped, “margin is used to buy equities. He likes individual equities.”

“Well no one uses margin so why does he want it?”

You can see by the words that are coming out of my…..fingers that Mariusz is kinda right. My fellow brokers or reps as we call ourselves did not know much about what was going on, nor did my supervisor. They didn’t know the products being requested by the customer and didn’t seem to keen on trying to help the customer.  So Maruisz the answer to your question is probably not. Most reps push specific funds or annuities because we get paid to do it. There is really not a business model set up to compensate the rep for achieving higher returns with the exception of the big evil only for really rich guys “Hedge Fund”.

So in turn, as an investor whether you  are investing 1000 bucks or 100,000: Do your research, know your goals, know your time frame. Most investment reps do want to do right by the customer, but you need to make sure you do your homework as well. If anything, ask around or go to www.finra.org and do a broker check.  It’s your money and no one will watch it better than you.

Except me.