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Matt Levine

Merrill Lynch Puts Down the Phone

Also SPACs, Robinhood and IPOs, crypto deleveraging and NFTs.

I don’t know a lot about how the private wealth management business worked in the 1800s but let’s imagine, shall we? I assume that the main way that PWM advisers got clients was through referrals: Wealth was frequently inherited, wealthy people formed a closed social set, a rich person who needed a financial adviser could ask a few friends and use their adviser, etc. It is a high-touch, trust-based business, and the most reliable way to win clients is through a warm introduction.

At the same time, some people probably didn’t use their friends’ financial advisers, for whatever reason: They were new in town, or they were nouveau riche industrialists without fancy friends, or they didn’t like their friends’ adviser’s approach to asset allocation. And some advisers needed to start new businesses without a network of clients and referrals. And so presumably some number of ambitious financial advisers traveled the country, looked for the biggest house in the neighborhood, and then walked up and knocked on the door. “Excuse me, are you in the market for financial advice,” they would ask. “Can I tell you about the excellent business prospects of Amalgamated Buggy Whips Ltd.?” That sort of thing.