No one wants to be a "stockbroker" any more. Think of the other various ways that registered representatives care to define themselves these days...financial consultant, investment advisor, etc. Never a "stockbroker." Stockbroker...bad. Wealth Manager...good.
Bill Nicklin, the founder of Horsesmouth, has a good column on this today, entitled, "Stock-Pick Your Way to HNW Clients." He points to the various reasons as to why the industry has moved away from the "stockbroker" terminology...as well as the regimen of picking individual stocks.
- From a legal and compliance standpoint, stock-picking has become difficult and riskier.
- From a firms point of view, the stock-picking skill is difficult to acquire...and it takes too long for rookies to become proficient at it.
- From the perspective of the academics, stock-picking is a fruitless effort on behalf of the investors who believe that they can beat the market.
- From the Financial Supermarkets vantage point, advisor's who focus on individual stocks do not use the other products and services on the shelf.
All of this has created an interesting phenomenon. Ask a financial advisor these days what they think of the stock market these days and, more often than not, they respond by very quickly saying, "Oh...I don't pick stocks." As a matter of fact, the advisor who will accept the "stock-picker" self-identification is the rare exception these days...a tiny island in a sea of asset allocators and financial planners.
By the way, Bill Nicklin's definition of "stock-picker", is NOT the advisor who buys penny stocks on rumor. He is talking about stock-pickers who select companies the old-fashioned fundamental way: based upon their expected earnings environment, business attributes, financial underpinnings, and who have the patience to accumulate this position over many years time.
There is no question that Bill Nicklin is a bit of an anachronism. Yet, he is a throwback with a indisputable track record of personal success. In addition to founding Horsesmouth, Bill is also in personal production...as a "stockbroker." At this point in his career, he has many hundreds of millions of dollars under management...and has generated more than $50 million in commissions over the course of his career. He must be doing something right.
Nicklin's other interesting point is that stock-picking and prospecting go hand-in-hand. He illustrates how his stock-picking prowess has led to strong connections with many, many affluent clients. In fact, he estimates that over 80% of his current book of business was acquired through his focus on stock-picking.
Being a stock-picker is not for everyone. Even in the "good old days", the industry was populated by folks who couldn't pick a stock to save their life. As a rookie trainee at Paine, Webber, Jackson & Curtis, I sat next to a gent who put everyone in his book...regardless of their financial circumstance...into just ONE company. I heard him tell the story of his favorite company countless times over the course of the day. This guy was a compliance nightmare, and he buried more investors than the local mortician.
However, today, September 19, 2005, with the term "stockbroker" being anathema to the industry...a vacuum has been created, and nature abhors a vacuum. If you are a financial advisor who dares to be different, and have the temperament and patience to pick stocks for your clients and prospects...you have a wide-open playing field in front of you.
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