CheckMate

I want to congratulate my dear friend and co-founder of this firm, Dr. Chris Howard, on his selection as the new president of Hampden-Sydney College:

I can’t possibly tell you just how proud and excited all of us who know Chris are about his selection for this position.

You may have already heard about this story - it really speaks for itself and needs no comment from me.

Well, other than to say it’s nice to know there are still some stand-up people and companies who “walk the talk” and will do the right thing:

“Five-figure bonuses stun Chicago plant workers”

Another perfect example of what I’ve been saying about the need to be very, very cautious in buying into any of the predictions floating around now…

Ever since the Bank of America acquisition of Merrill Lynch was announced, the press has been full of stories about how all those Merrill financial advisors were going to leave in droves.

First there was all the speculation that no matter what the retention deal was when it was released, it wouldn’t be enough to keep them there.

Then after the retention deal came out a few weeks ago, the hype continued along the lines of how there was going to be a mass exodus of Merrill advisors because of the way the deal was structured, i.e., it rewarded top performers who produce over $1 million annually far more so than those under that number.

Well, guess what - it didn’t happen. Here are the key numbers from “Merrill reps overwhelmingly go for BofA deal” in Monday’s Investment News:

• 94% of financial advisors who were offered a package signed back on.

• About 6200 of the roughly 6600 financial advisors who were offered the deal took it.

• 99% of financial advisors who produce $1.75 million annually or more accepted the offer.

Read those numbers again - I’d say “overwhelming” pretty much covers it.

Some will likely quibble with that definition because, as Merrill Lynch said, “only about half of the firm’s nearly 17,000 advisors were eligible in the first place”, but, as Merrill also said, those eligible were “responsible for about 75 percent of the firm’s production”. (See “Update: 6,200 Merrill FAs Sign BofA Retention At Deadline” at Registered Rep.)

So why did so many stay? I’m no great pundit, but I think it’s a sign of the times and really pretty simple. With things being so turbulent right now, most of the Merrill advisors saw no great advantage in leaving and thought it was a smarter move to stay put.

Now that’s not to say that I don’t think it’s a smart move for some advisors, especially top producers, to make a move if the timing and situation are right - far from it. Nor do I think that this is a big sign that this is the end of top financial advisors leaving their current firms - that’s always going to go on.

No, my point is just what I said at the beginning and have been saying for some time now. Be very skeptical about any predictions you read, especially right now, and examine them closely, particularly the source of the prediction.

And if you’re someone who’s intent on becoming a financial advisor, I’d also say there are some very good lessons here, not only about the nature of predictions, but, more importantly, about what actually happened at Merrill Lynch.

I ran across this great John Kenneth Galbraith quote the other day, and I will admit I hadn’t heard it before.

He said it back in 1993, but it’s never been more appropriate than right now:

“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

- John Kenneth Galbraith, Wall Street Journal, January 22, 1993

Please keep that in mind as you read the seemingly infinite number of words being written about the financial markets, “meltdowns”, recession, depression, and so on.

More specifically, don’t base your future career choices on anybody’s predictions about “what’s hot and what’s not”. I bet you can think of a number of careers that were once considered the “big thing” but don’t look so good right now - I know I can. And if you went into one of those careers not because you loved it, but because you thought you had a sure thing forever, you’re likely to be mighty disappointed right about now.

If becoming a financial advisor is what you have in your heart to do, then do it.

This is definitely not a political post - if you haven’t noticed, we stay away from that area entirely here.

What we do write about is helping you achieve personal success, in particular by becoming a financial advisor. And that’s what this post title refers to - your personal success.

Things have been decided, we now know who has been chosen to be our next President, and many are naturally wondering what the future holds and how that will affect them.

I’m not sure where this quote originates, but I know I’ve heard Dave Ramsey and Dan Miller repeat some variation of it many times for several years now:

“Your chances for success are not determined by what happens in the White House, but by what happens in YOUR house.”

That runs directly counter to many people’s thinking, which is why Dan and Dave repeat it so often. Now, they aren’t living in some fantasyland or saying that decisions made in Washington, DC have no impact. But what they are saying is that ultimately what happens to you is dependent on you, and if you’re counting on Washington to make you successful (or unsuccessful), you’re focusing in the wrong place.

They’ve also said that they will certainly review their businesses and make course corrections as necessary - that’s something they already do all the time, and naturally recommend that you should do the same with your career or business. But the gist of their argument is this - if whatever you were doing before the election is affected that drastically by the outcome of the election, then you were in the wrong business or career to begin with.

No question in my mind that’s the case with being a financial advisor, too. Where you go to work might be different, and how you do business as an advisor might be different, but nothing has changed so much that it should keep you from becoming a financial advisor.

I mean, think about it - have you ever seen a time where people were more in need of sound financial advice than they are right now?

On the other hand, if some outcome of the election has changed your mind about being an advisor…well, maybe it wasn’t the right career for you to begin with. And that’s OK - better to know that now than several years down the road.

So, while the nature of the business will change, the firms with openings might change, and many other factors may change as well, as I’ve said all along - if you truly want to become a financial advisor and have the right skills and aptitude, you can become one.

As a potential financial advisor, you need to have some idea of what clients might ask you.

One good way to do that is to see what financial publications might be telling people that they should ask you, since there’s a good chance your potential customers are reading those magazines.

This short article in the November issue of Kiplinger’s Personal Finance magazine gives you a nice succinct list of questions you could be asked - take a look:

“What to Ask Your Financial Adviser”

Nothing particularly complex there (although the answers to those questions could very well be), but those are all questions you better be prepared to answer.

I love stories about comebacks. This one would be great to read anytime, but especially so now with what’s going on daily in the markets and the economy.

The headline pretty much tells the story - “A return to his calling - Louisville’s Hallion goes from out of umpiring to in the Fall Classic” - but let me give you a condensed summary.

Tom Hallion decided he wanted to be a baseball umpire in 1979, so he quit going to college, took money out of savings, went to umpire school, and spent the next six years working his way up to the major leagues. In 1999, he was one of the many umpires who quit their jobs during a contract argument with Major League Baseball, thinking they would finally get some action on their demands. Instead, they found themselves out on the street with no jobs.

You can read the rest of the story at the link to find out how he got there, but here’s the bottom line:

“Tomorrow night he’ll position himself down the third-base line in Florida.”

Yep, Tom Hallion is umpiring in the World Series this year.

Comebacks do happen, and don’t ever forget that.

For all the current discussion about just what’s caused the current problems in the financial markets, I really haven’t seen much about the exact, specific actions on specific dates that caused things to fall.

I just read two very interesting articles that are the exception to that and revolve around the same theme - the role of JPMorgan Chase in the failure of both Lehman Brothers and Merrill Lynch.

There’s a lot of speculation about the intent and exact nature of JPMorgan’s actions, but, in my opinion, what’s not in question is that in both cases those actions were the proverbial last straw and drove both Lehman and Merrill under.

The first article is a NY Times piece called “The Road to Lehman’s Failure Was Littered With Lost Chances“. It’s a really good outline of the timeline of the demise of Lehman, but what was most interesting to me was this part:

Lehman executives complain bitterly that any chance of keeping the firm alive began to dissipate rapidly just after Labor Day when JPMorgan Chase, which handled Lehman’s trades, came calling for more money. Lehman had put down securities it believed were worth $6 billion during the summer to assuage the bank’s concerns that its trades were risky. But JPMorgan thought those securities had deteriorated in value, and asked for $5 billion in cash or liquid assets on Sept. 4.

Over the course of the next week, JPMorgan requested more money from Lehman. However, executives at the two companies disagree over how much money was requested and whether the requests were reasonable. The dispute has become part of a legal claim filed by creditors of Lehman.

I’m surely not on the inside to know exactly what happened, but I think it’s pretty clear that JPMorgan basically called Lehman on the loans they had out with the result being that it was “the end of the line”.

The second article - “Was Merrill ‘Chase-d’ Into Its BofA Marriage?” - at CNBC refers to the Lehman situation and states that JPMorgan pulled the same move with Merrill they had with Lehman:

On Friday Sept. 12, Chase officially alerted Merrill it wanted an additional $5 billion in collateral. Merrill did not come up with the collateral.

Around that time, Merrill began negotiating with Bank of America. That Saturday Merrill’s chief of strategy, Peter Kraus, told Chase that Merrill wasn’t going to deliver the collateral — but not because of liquidity issues. Merrill was objecting to the principle of asking for additional collateral.

By Sunday night September 14, Bank of America purchased Merrill.

I’m not sure why I haven’t seen more discussion about this one, frankly, along with a lot more questions about JPMorgan Chase’s timing and logic behind calling both firms on their loans. It sure would be very educational to know the significance of the timing - just why did JPMorgan feel that they had to press the issue with both firms during the first two weeks of September? And who at JPMorgan made that call?

This is just a wonderful story I ran across today, and a tremendous example of a financial advisor who’s making a big charitable impact. It’d be a great story anytime, but especially so now with the daily dose of financial sector bad news, finger pointing, and “Who shot John?” blame that’s going around.

Phil Eggers is a financial advisor in Plano, Texas who is also a pilot and the President of the Board of Directors at Grace Flight of America, an organization of volunteer pilots who fly patients to get specialized medical treatment that isn’t available to them locally. Most, if not all, of those patients are either in locations without scheduled air service, simply aren’t able to afford that type of travel, or both.

Check out Phil’s story at “Adviser gives back, with flying colors”. There are a number of very touching testimonials from those who’ve benefited from Grace Flight, and Phil also describes how he came to be a successful financial advisor. I liked his comment here a lot:

The 43-year-old Mr. Eggers is happy to help people in need.

“I didn’t have squat growing up,” he recalled.

Financial services was his ticket out of his Iowa farm community, and Mr. Eggers said he knew he wanted to be an investment adviser since he was in middle school, inspired by a cousin who was a broker and the “the success in the family.”

Clearly somebody who has never forgotten where he came from.

As I’ve said before, we generally don’t toot our own horn around here, but sometimes we do make exceptions.

Some of the work that our Managing Partner, Dr. Chris Howard, is doing in the area of diversity recruiting is really outstanding, and I want to brag a little about my very close friend and business partner.

As the youngest Falcon Foundation Board of Trustees member, Chris chairs the Diversity Committee and is leading a $220,000, multiple year initiative in select school districts to increase the candidate pool of minority applicants to the U.S. Air Force Academy.

In addition, Chris has also received a federal planning grant from the Commission on National and Community Service to create an AmeriCorps program at the University of Oklahoma meant to increase graduation rates among under-represented minority students.

I could go on - Chris always has so many plates spinning in the air at one time I can’t even keep up with him - but I’ll just leave it at that for now. I just wanted to mention how proud I am of Dr. Chris Howard, and how fortunate we are to have someone with his great talent and commitment associated with this company.