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2009-11-13 - extension: 7z - size: 115 MB

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2009-10-26 - extension: avi - size: 102 MB

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2009-10-26 - extension: avi - size: 97 MB

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RELAXATION PLUS: ( "It reminded him of a massage parlor called Relaxation Plus on the corner of 53rd and Lexington."
"It reminded him of a massage parlor called Relaxation Plus on the corner of 53rd and (More) "It reminded him of a massage parlor called Relaxation Plus on the corner of 53rd and Lexington." In the '80s, the management program had turned into a huge profit center under Len Reinhart, who now runs Malvern, Pa.-based Lockwood Financial Group, named in honor of Jim. Many young brokers I talk to today think universal life insurance is a hot new product. Wrong--it was molded in the EF Hutton product crucible more than 15 years ago. The same is true for the Personal Financial Management planning system that Hutton introduced in 1975. Other concepts whispered first by Hutton brokers to their clients were back-end fees for mutual funds--at a time when funds charged investors front-end fees as high as 8 percent--and variable annuities, when they were more profitable than they are today because customers could wrap their existing portfolios into the annuity. Hutton, of course, didn't shy from risky products and businesses. It was one of the few Street firms in the '70s that urged brokers to sell gold bullion, which was held in depositories in the CIBC Bank in Canada. And Hutton was also the first firm to move heavily into insurance, purchasing California Life in the middle of the decade. Getting It Out EF Hutton's retail structure was simple, but organized, to get product out to the system fast. Ball insisted that most branches have resident product managers and branch sales coordinators to help brokers push the firm's waves of proprietary products. "Literally, inside of a couple of hours, a new product could get right down to the individual account executive because of this type of organization," Muratore boasts. Hutton's reputation wasn't hurt, of course, by its distinguished lineage. In the 1930s, for example, it financed young J. Paul Getty's foray into oil. Getty returned the favor by appearing in one of the firm's memorable "When EF Hutton talks" ads in the 1970s. "We felt like we were a family," says Dale Frey, who was the Rocky Mountain regional manager, and now runs his own independent brokerage firm in Denver. "I think it's very difficult to find teams in corporations because it goes against the competitive spirit. But at Hutton, we were successful in creating a family, a team type of environment, and that attracted the best in the industry." The Perks Of course, there were the excesses, which helped motivate and, some say, corrupt eager young managers. Junkets for surpassing sales goals abounded. Veterans savor memories of the 1976 reward trip to England and Spain. The first night, everyone was sitting in a huge dining room in a castle just north of London. Suddenly, the doors burst open, and in marched 60 red-kilted, fur-hatted members of the Royal Guard, their bagpipes and drums blaring and thumping. The trip concluded with a bull fight in Barcelona. Ball, of course, was a master psychological motivator, and he made sure that branch managers were trained to get the most out of their charges. "We spent inordinate amounts of time training branch managers, not only in the technical aspects of their jobs, but also in the psychological aspects--counseling, coaching, things of that nature--so that there was lots of control on the local level," Muratore says. Failure to motivate was never much of a problem at the aggressive firm. Failure to supervise from a regulatory point of view, however, was a different issue. "Hutton's critics have said, Yeah, things were managed so well there that the firm went under,' " says Muratore. "And, to a certain extent, they were right." The Downfall The beginning of the end for Hutton was the discovery in the early 1980s of a check-kiting scheme aimed at reaping extra cash for the firm from its banks. The scandal prompted a congressional investigation, and Hutton executives had to admit that there was no line of responsibility for cash management operations. However, Hutton Chairman Robert Fomon persuaded the legislators that no senior executives were involved in illegal banking activities. In 1985, Fomon pleaded guilty on behalf of the firm to 2,000 counts of mail and wire fraud. That cost the firm $2 million in criminal fines, $8 million in victim compensation and, ultimately, its life. Much of the force that was Hutton fled after the guilty plea. One of the first was Ball, who jumped to the president's post at Prudential-Bache Securities. "That hurt the firm the most," says Engel, who is now a broker at PaineWebber. "He was really the glue. We had one person to answer to, and everybody respected him. Without him, there was no unison of purpose, and there was nobody who could convince anyone else what should be done. The politics began, and guys started leaving. The structure just began to break down." In 1986, Fomon brought in a care-taker manager, Merrill Lynch's one-time wunderkind Robert Rittereiser, but it was too late. One year later, Hutton was acquired for $1 billion by Shearson Lehman Brothers. By then, more than one-third of the legendary sales force had quit, dispersing to every major firm on the Street or starting profitable private management or consulting firms. Hutton's last press release was issued on January 15, 1988. It reported that the firm had lost $112.7 million in October and November of the previous year. ? (Less)

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