CheckMate

Star Jock Brokers Score Points With Dim Clients

Commentary by Susan Antilla

June 3 (Bloomberg) — You know things are getting back to normal in the markets when a brokerage firm shamelessly touts the arrival of a new recruit whose claim to fame isn’t that he has an M.B.A., or even that he’s good at making money.

Morgan Stanley has a new guy who set the National Football League record for the most receptions by a wide receiver in his first two seasons. Hey, isn’t that a reason to hand money over to a stockbroker?

The company said on May 27 that it had hired Wayne Chrebet, formerly of the New York Jets, to be a financial adviser in its Red Bank, New Jersey, office. In its 11-paragraph press release, the firm ticked off his NFL accomplishments, his charitable work (which is significant), his degree in sociology, and his awards. Nowhere, though, did it say anything about why Chrebet, who sounds like a decent enough guy, would be a good pick to manage an investor’s money.

The question of “What’s in it for the customer?” is so silly that Morgan Stanley spokeswoman Christine Pollak said she would have to check and get back to me. But let’s not pick on Pollak; it’s an open secret on Wall Street that the people who handle customers’ accounts are often hired for reasons that have nothing to do with their ability to look after a nest egg. You can’t blame her that the industry-wide system is driven by sales first, competence second. Or third. Or not at all.

Network of Pals

What does count in a new stockbroker is the ability to tap pals and former associates who have big bucks to open an account, and that’s something that guys such as Chrebet are well equipped to do, says Art Romero, who recruits stockbrokers for firms, including Smith Barney and Morgan Stanley.

“Any company would love to have a professional athlete on the payroll,” he says.

It works that way partly because athletes who make multimillion-dollar bonuses feel more comfortable entrusting their money to one of their own, Romero says, so making a hire like Chrebet is a coup.

Mere mortals outside the sports world with only a million or so to spare are also attracted to big sports names, says Kenneth L. Shropshire, professor of business ethics and director of the Wharton Sports Business Initiative. Brokerage firms know well that there’s a chunk of the investing public uncontrollably prone to name-dropping. Give them a broker with a sports background, and they are off to their next cocktail party blabbing about Joe Jock.

‘My Guy’

“There is some group of people who want to say ‘This is my guy,” Shropshire says.

Jocks who go into the investment business don’t necessarily do a bad job; it’s just that name-dropping is a stupid reason to pick a broker. Or maybe not. If “your guy” was a former California State baseball star named Salvatore “Sam” Favata, you now have cocktail-party bragging rights to knowing Prisoner No. 43941-112 in the Lompoc Federal Correctional Complex in Lompoc, California. Favata, a former president of the private money investment division of the now-defunct National Consumer Mortgage of Orange County, California, pleaded guilty in 2006 to defrauding investors of more than $30 million in a Ponzi scheme.

Then there’s Lenny Dykstra, the former New York Mets and Philadelphia Phillies player who became such a hit with the public as an investment expert that he started a column in 2005 for Thestreet.com, was hailed as a “fledgling guru” by Fortune magazine in 2006, and started an investment magazine for athletes last April.

Dykstra’s Lawsuits

Today, he is behind on payments on the California mansion he purchased from Wayne Gretzky, according to news reports, and he’s dealing with lawsuits from his airplane pilots, people involved with his magazine, and Oppenheimer & Co., one of his brokers. His magazine was shut in November. Thestreet.com replaced him in April with Jon Najarian, another sports guy (former middle linebacker for the Chicago Bears). And presumably, his dopey followers have moved on to some equally unfit investment superstar.

At Morgan Stanley, Pollak did get back to me to delineate Chrebet’s qualifications. “I can tell you that over the last six months, he’s been with the firm and he has received all of the appropriate and required licensing and training, officially becoming a financial adviser on the 22nd of May,” she said. Chrebet himself wasn’t available for comment, Pollak said.

Shropshire, the Wharton professor, says you don’t have to be a jock to wreck a portfolio; and, who knows, maybe Chrebet will be the next Warren Buffett. Still, the sports-star-turned- broker phenomenon reminds Shropshire of the same “in crowd” mentality that drew some investors to sign up with Bernie Madoff.

If the best argument for hiring a broker is that he’s a star at something other than making money, watch his videos on youtube.com and make a contribution to his favorite charity.

(Susan Antilla is a Bloomberg News columnist. The opinions expressed are her own.)

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