New Math on Wall Street: Inside the Wirehouse

You’re gonna love this gem I found over at Investment News:

Let’s say you’re running your own sales force. You have a certain number of salespeople and a certain amount of revenue. How do you compute the average per salesperson? Well (and I was an English Major), the answer is simple division, right? In the headhunting world, regardless of industry, it’s called a “per desk” average. If you have a recruiting firm with 10 desks, and you are doing $2 million in revenue, then your per desk average is $200,000.

You’d be forgiven if that’s what you thought that’s the math the big Wall Street firms were using to calculate the numbers they report to the public about the state of affairs inside their walls.

The Big Brokerage business, however, likes to report its own numbers which mysteriously favor whatever statistic that they are comparing. When reporting the total number of sales people, the Big Brokerage firms count EVERYONE, including rookies as well as other registered personnel. Yet, when they report an average production figure, that number excludes trainees, and the other registered personnel.

…I’m told by Morgan Stanley Smith Barney and Merrill Lynch executives that these firms have been gaming these numbers for years. The recent article in Reuters which quotes internal Merrill Lynch reports says that Merrill had 12,107 revenue generating Advisers at the end of 2011 while reporting a total headcount of 16,165. And Morgan reported 13,745 producing brokers in March while having 17,193 total Advisers.

The insanity continues. Jump on over to Investment News for the rest…

New Wirehouse math: Inside the numbers


ht: CG