Taking Over a 20 AUM EDJ Office

need more info before you decide…

I am a “new” guy and have been told (but not in writing) that I am in line to take over a EDJ office with 20 AUM.

My questions, if you so choose to reply are these:

1.  Do you factor a 40% payout on the AUM?  I.E. how would you view an income stream for the first year. - No.  AUM has no bearing on your payout.  Your payout comes from commission dollars.  So just because you take over a $20MM book doesn’t mean you’ll be making any commission dollars.  It’s the clients you’re interested in.  As far as your income stream goes, it could go really well if you work hard or you could make the minimum Jones will guarantee you if you sit on your butt and don’t do anything. 

2.  How typical is it for Jones mgmt to just “move people” out of a region - do they really have to screw up an office. - There could be a number of reasons that office is empty.  If Jones fired the last FA it could have been from lack of production.  Or he could have sexually harrassed his BOA.  Or he could have signed one of his clients names on a document.  Plus a couple dozen other variations of the above.  Ask the RL why that person left. 

3.  Do you usually see an asset attrition rate of 70% (meaning that many assets go with the old rep)? - If it’s a non competitive situation, like you said it was, then no.  You won’t see much attrition at all.  If the other guy went to some other brokerage firm, then you can expect some attrition.  I wouldnt’ guess 70%, but it could definitely be 50%. 

4.  Would you move 160 miles away, leave all your friends, with a wife and two kids to take over an office - and yes I am cut out for door-knocking, been in sales for 12 years (outside, inside, cold calling - just burned out on the industry I am in) - Live where you’re happiest.  The open office can be a great kickstart, but it’s not the golden ring.  You can still fail after taking over an office like that.  I’d get all the info I could before making a move like that.  With that said, if I were new/new again, looking to start a new career and someone offered me a 3-4 year headstart if I moved, I’d be packing my bags and my house would be on the market tomorrow. 

Your input, although you don’t know me, is highly valued and I believe in “paying-it forward” - you never know when you are going to need some good advice.  What comes around goes around…thanks.

I would also find out what the assets look like:

Johny, the other thing to consider is, if it is a choice between this and opening your own EDJ office from scratch, it’s a no-brainer - take it. If it’s a choice between this and another job/firm/opportunity, then you need to do some additional homework. But if you do take it, no matter how good the assets and clients are, you still cannot survive on 20mm. You MUST focus on prospecting. It’s imperitive that you fight the urge to just work the existing book. If you succomb to that urge, you will be back on this site 3 years from now, talking about how Jones lied to you, how they roped you into an office with “crappy” assets, how you can’t succeed because they don’t offer triple- short options on pork belly futures, etc. So here is your advanced warning…those assets WILL NOT sustain you. You MUST develop your own book. Those assets will simply keep you eating while you grow your own book. Trust me. Trust me. Trust me.

First of all,

Wow Ice,

Hello all. I just joined and am enjoying your posts!

So I am in a similar situation...

I have been approached about taking over a 25+ Mil AUM office. My question is this: how does this effect my goals and bonus structure...my salary?

As I understand it I basically get a new account bonus and others for the first two years... does this change if I take over an office like this?

Thanks for your help!

Kodak

I didn't ask a no-no question, did I?

Does anyone see the recurring theme? 20-25 million dollar offices open?? The new production standards are working.

The new production standards haven't started yet.  They take effect Jan 1.  Anyone leaving today is making a choice to leave because they believe it will be too difficult to raise their monthly production from $18K a month to $20K a month and then eventually $22K a month.  Instead of just figuring out how to gross an extra $2K (one LTC trade a month or an additional $50K in MFD sales) they figure it would be better to go to Ameriprise or MSSB or some variation of them and lose 30-40% of their existing book. 

Kodak - taking over an office does change your production standards.  At least it used to.  I don't know if it changes your bonus structure, but I wouldn't think it does.  Most of the new people in my region end up taking over an office and many of them hit their milestone bonuses.  If you end up taking over a $25 Million office, you really shouldn't have to worry about production standards.  The trails alone will probably keep you above the meeting expectations line for a while. 

Thanks Spaceman,

Your help is greatly appreciated!

Kodak

For anyone who has experience taking over a branch, what is the best way to put the existing clients at ease?

Hey Spaceman,

 I was a meeting Seg 4, the program started September selling month. And now my pay out is 90-93%. So if I sell that extra LTC I keep $1800. Oh yeh I can share an office with an accountant now....

I saw that Jones lost another 100+ FA's in November.  They're dropping like flies now.

100+ I think... No wonder they been pouding recruitment down our necks. An improving job market is going to make it tough for them to lock in job changers I suspect.

B24 wrote:  I saw that Jones lost another 100+ FA's in November.  They're dropping like flies now.

I understand less than 10% of those losses were bonus eligible.  What would be interesting is to know how long they were employed at Jones.  There's a difference between "not bonus eligible" at year 10 and year 3.  Looking a little deeper at the numbers would shed more light on the situation.

Doesn't matter though.  Even if they were rookies, small producers, that's where the growth is.  If they are not adding brokers, they are not growing.  The bigger, veteran brokers produce the bulk of the income, but generally veterans do not grow their revenues very much.  How many $1mm producers from Jones grow their revenue 15%+ per year?  Take ten $100K 3rd-year producers at Jones, and they may grow their revenue 50%+ year-over-year. 

That's what most people don't get about Jones' model - they NEED new brokers in order to grow revenues.  Why do you think they are pushing Advisory Solutions so hard on veteran producers??  I can tell you it's NOT because it's the "best thing for the clients".  It's the only way to grow veterans' revenues.

B - I think we are on the same page.  It doesn't mean a whole lot if Jones is losing dead weight (long term low-producers.)  It would hurt more if the losses are newer FAs whose revenue has been steadily climbing but are just not bonus eligible yet.  There is a huge difference those two demographics but Jones doesn't decipher between the two.  At least not to the masses.

1) EDJ sucks badly!  I have no shortage of $350k-$500k EDJ brokers actually calling me back BEGGNG for jobs that I have no patience for newbies!

2) Get out now! good luck and may God bless you!

:)

Oh good, an EDJ sucks thread. 

So, this multitude of Seg 4 & 5 FAs that you have calling you back, where do you send them?  Indy?  Other wirehouses?  How many EDJ guys  

What is it that EDJ sucks at?  Products, service, payout?  Do they suck because they're raising the production requirements?  Please expound.  I'd love to hear the recruiter sales pitch. 

[quote=down the road]

Hey Spaceman,

 I was a meeting Seg 4, the program started September selling month. And now my pay out is 90-93%. So if I sell that extra LTC I keep $1800. Oh yeh I can share an office with an accountant now....

[/quote]

Am I interpreting your broken English correctly?:  You were a Seg 4 producer who was actually doing Seg 4 numbers.  You think the change in production requirements changed in Sept because thats when the Jan rolling 4 month number goes back to.  You went indy someplace that has a 90-93% payout on LTC. 

Um, congrats.  What does that have to do with the conversation about the production standards?    

[quote=B24]

I saw that Jones lost another 100+ FA's in November.  They're dropping like flies now.

[/quote]

Not that I'm doubting you because we lost 2 in my region in November, but where did you see the total numbers? 

Read the most recent Weddle comments, Spiff.  When you put down your kool-aid that is.

I found them and read them.  It is alarming that we lost 174 FAs in Nov, but it doesn't suprise me. Like I said, we lost two in our region.  Neither of them were bonus eligible, but they did go to other firms.  One was out 10+ years the other about 3.  I don't think they've done a bang-up job of taking their assets with them.  Too bad for them, I liked them both. 

It wouldn't suprise me to see another similar number in December's results. 

Maybe I'm a little nieve but why all the attrition now? Is it that EJ is not adding as many new FAs or is there just a mass exodus due to increased performance standards?  It seems puzzling there would be this many people all finding the grass greener on the otherside at the same time. 

I thought the goal  of all the EJ reps was to leave and go indy!

Only the smart ones. 

[quote=Kaner]

Maybe I'm a little nieve but why all the attrition now? Is it that EJ is not adding as many new FAs or is there just a mass exodus due to increased performance standards?  It seems puzzling there would be this many people all finding the grass greener on the otherside at the same time. 

[/quote]

It's primarily newbies.  So it would SEEM not to be a big deal.  But the problem is that newbies are where the growth is.  Honestly, something is going on where newbies are just not making it.  I don't know if it's the market, the firm, the standards, I don't know.  But my first years (2005+), newbies seemed to stick.  The past 1-2 years (even post-2008 meltdown), my region has absolutely CHURNED through newbies.

175 FA net loss is Jones largest net loss of FA's in years.

I don't believe the 174 was a net number.  The firm statistics page says we went down by a total of 97 FAs.  That number certainly was impacted by there only being one Eval/Grad class that graduated.  Had there been two E/G classes it would have not looked as bad. 

Now, losing 174 FAs in a single month is bad.  We talked a little about this in a meeting I was in recently.  The general consensus was that it was partly because of the lack of quality noobs they seem to be hiring recently, partly because of the changing standards, and partly because some people are making plans for 2011 and knew that the week of Thanksgiving is a good week to move to a different firm and get a jumpstart on making calls to your clients asking them to jump too.  Lots of places to point the fingers. 

At Jones, man, be a bit more selective when you hire, and don't overpopulate your areas. Make it a point to hire the right people, and get them started with a 20m hand me down book. Lower your failure rate by a HUGE margin, maintain the integrity of your firm, and industry.

I noticed some of the younger Jones reps at this website are no longer posting...

They're over on the other site...nah, just joking with ya. 

I think the higher ups at Jones realize that they are living out the definition of insanity with sending the continual stream of noobs through KYC and Eval/Grad.  We've had 2607 people start KYC in 2010 (yes, I added them all up).  But we're awfully close to finishing 2010 with the same number of FAs we started 2010 with (if we ended the year right now we'd have net outflows).  Which means we would have averaged losing around 220 FAs every single month this year.  I went back to look at KYC classes in 2004.  We had 1677 people go through KYC that year, but we only added a net of 67 FAs. 

We've got 110 people slated to be added to the roles in Dec (or at least scheduled to start Eval/Grad).  Without any attrition in December, we'll have added only 123 people this year.  That's pretty sad considering we brought on 2607 new FAs.  

BFP - I think Jones would love to do exactly what you just outlined.  In fact they've been going against the traditional growth at all costs mantra recently.  The GPs realize that we just can't keep throwing away almost $200 million a year in training costs for FAs who aren't ever profitable.  I work in one of those oversaturated areas, so I know exactly what you're talking about.  The new FAs can't prospect without stepping all over each other.  The vet's can't prospect without hearing about the three other new FAs who just doorknocked that neighborhood last week.  It's a tough place to try to build a book.  If all of the noobs were handed $20 mil books (or weren't hired until there was $20 mil to give them) it might get a bit easier for them to make it.  I know taking over a $20 mil book would have made things a ton easier than the one I ended up taking. 

Now, if we can just get those transfer brokers to take Jones seriously and bring their big books with them...   

Jones model, has a few big probs. 40% payout for what's offered, may have been good 15 yrs ago, now it isn't. The markets are saturated, over covered. The brand name is being diminished by excessive amounts of fledgling and failed reps. Raise the payout, and cut hiring by 80%. Going forward, do not hire a person unless there is an 80%+ chance of success.

And only pick stocks that go up... Can you explain how to hire a person with "an 80% + chance of success"?

I'm sure Jones would love to figure out how to only hire people with an 80% chance of success.  Heck, if I could figure that out, I'd start my own firm. 

40% payout is standard for the non-indy world.  I don't see it changing in the future.  We could get into a discussion about Jones payout and what they pay for vs. an indy office, but we've been down that road before.  I think the Jones payout is better than most, especially for the newer FAs because there isn't a grid.  You don't have to do $250K gross before you get to the top payout.  Everyone gets the same.  I don't understand why people stay at places where there is a grid.  It would just piss me off to know the guy in the next office is getting paid 20% more to sell the same products as me. 

Spiff, I agree, the Jones payout is great for small producers, compared to other firms.  At most wires, a $200K producer is probably pulling down less than 40% because of the grid.  Problem is, the majority of Jones FA's are in the $175-350K production range.  If you exclude newbies (like first 3 years), I would guess 80%+ fall into this production range.  To have a virtually identical setup to a Jones office, at 40% profit margin to the advisor, you would probably only need 100K-150K in revenue.  Above that, an indy advisors payout goes up beyond 40%.  Now, I am not talking about million dollars and multiple assistants and all that.  I am talking one advisor and one assistant.  For example, a $300K producer could EASILY net 65-70% as an indy.

Herein lies the rub...independant costs have dropped dramatically over the years due to technology.  You can outfit a single advisor/assistant indy office FAR less expensively than a Jones office, while spending FAR less on ongoing expenses.  It's just a simple fact.  Because Jones has to standardize for 12,000 offices, everyone needs xxx.xx square feet of space, a phone server, a network server, the all-in-one fax/copy/scanner, the big expensive color high-speed printer, 6 expensive new chairs, 2 big new desks, 2 expensive new office chairs, real-time quotes, Morningstar Workstation, the flat screen TV with streaming video, all the gay paintings, access to dozens of different technology systems that are all tightly integrated, etc.  And how about the huge cadre of "analysts".  I don't need to hire an entire bond department, stock department, mutual fund department, etc.  I just need to buy the specific research I need (and honestly, do you think Jones' research is the best out there?).  I don't need to subsidize the hiring and training of 2000 new FA's every year.

Don't get me wrong, all that stuff is "nice", but nobody needs/uses ALL of it.  But they have to provide it to everyone because they never know who is going to use it or not use it.  It works the same way at wires - they just use production hurdles rather than "profitability" to measure people.  But people wonder why big wirehouse prodcuers don't go indy?  Easy, their payouts can exceed 50-55% all-in.  AND you can build teams (MORE than just a couple of assistants).  And there are a LOT more $1mm+ wirehouse producers than at Jones.  At Jones, you have to be eclipsing 600-700K to have much of a significant bump in payout (due to profit bonus).  And in bad years (as we saw last year), you could be a $2mm producer and get paid out exactly 40%.

Bottom line, Jones model is really beginning to show some major cracks.  Even the wirehouses let big teams act almost autonomously under their umbrellas.  Jones needs to adapt their model (not scrap it) to changing times.

I disagree with you both. 40% sucks if you do all your own prospecting. A new/new FA only gets the platform from Jones and no office for a year under normal circumstances. Payout should be equal to something close to 30% for the producer, 30% for the prospector, 20% platform and 20% office space. Now if you say the FA is given 20mm then yes 40% is a bargain because he gets the office, platform and most of his prospecting is changed from cold to warm with the client base.

A new/new will most likely starve to death with a salary that fades away proportionately over the first four quarters and a 40% payout. Hell even banks will pay 40%. As for the wires, I believe their salary is for a longer period of time and they push fee based to replace that revenue.

B24 - You are absolutely correct that indy FAs get a better payout, even after expenses.  But Jones isn't an indy shop.  The only thing about Jones that resembles an indy setup is our one man and an assistant setup.  So, BFP's contention that 40% payout isn't good, is only looking at Jones vs indy.  When you look at Jones vs wires/regionals/banks 40% is average.  If I were to just simply look at my trailing 12 months expenses on my P&L, which includes my 40% payout, and divide it by my T12 gross, it's over 80%.  So, in essence, Jones got to keep 20% in profit from my operations last year.  I don't think that's too bad for all of the stuff behind the scenes that they do.  The fact that I got to see 40% hit my paycheck, but didn't really have to think about any of the rest of it, doesn't seem unreasonable to me.   

ND - Who pays 30% to someone just to prospect?  

So what you're saying is that if I were to start my own brokerage firm tomorrow, I should hire FAs with a 30% payout and their only function would be to work with clients.  I should hire prospectors and give them 30% for their prospecting efforts but all they're doing is smiling and dialing and setting apointments.  They don't ever touch money or make recommendations.  I should keep 40% for supplying my services as the B/D and the office space.  I could bring in 3 $1 mil producers, keep $1.2 Mil for myself, give them everything they want, including someone to generate leads for them, and they'll be happy netting $300K? 

Am I reading that correctly?   

[quote=Spaceman Spiff]

ND - Who pays 30% to someone just to prospect?  

So what you're saying is that if I were to start my own brokerage firm tomorrow, I should hire FAs with a 30% payout and their only function would be to work with clients.  I should hire prospectors and give them 30% for their prospecting efforts but all they're doing is smiling and dialing and setting apointments.  They don't ever touch money or make recommendations.  I should keep 40% for supplying my services as the B/D and the office space.  I could bring in 3 $1 mil producers, keep $1.2 Mil for myself, give them everything they want, including someone to generate leads for them, and they'll be happy netting $300K? 

Am I reading that correctly?   

[/quote]

I am sure there is some margin for error depending on total benefits package and overall job satisfaction but still these are the numbers I see.

For the 3 $1mm producers, they have the ability to do all the above. But if for some reason they want you to generate leads and all they are doing in your example is closing, then yes 300k would be correct. But they are probably 1mm producers because they can do all or some of producing, prospecting, office management etc. In other words, they don't need you.

Put it this way -

What would you give your COIs if they consistently brought only you 1mm dollar accounts? Of the 100% GDC, I think 30% would be fair to pay for someone that consistently brings you accounts that meet your requirements. I would not mind a revenue sharing agreement with a large CPA or Attorneys office where I am feed accounts and only give up 30%.

What if you are good at prospecting but just can't close? I think that value is worth 30%. If you can met plenty of qualified people and get them to the office for a meeting what would it be worth to pass them on to another advisor that will close the deal for you?

From my research I see the numbers I posted as being pretty close. Jones payout at 40% is low but if you add in there benefits package and so forth it is not a night and day difference. I would guess they are about 10ish% off maybe a little more.

I believe the wires have similar payouts for new/news but the salary lasts longer allowing the advisor to build more in fee-based.

Being a new new I couldn't agree with N.D's last comment.  The base salary for new new's is cut off way to early. 

When they cut my salary off I was exceeding, however exceeding was grossing $5000 a month.  You take 40% of that and after taxes and paying for your crap benefit package you are bringing home $1,400.  But for me, I wasn't even bringing home that much because I just opened my office at this stage were they cut me off.  Jones does supply you with a great setup (I don't want to get into that argument) but I had to drop about $300- $500 bucks on buying supplies and buying stuff for a BOA.  At that point I am bringing home about a G a month for a job I am working 55-60 hours a week at.   So I am making about $4.20/ hour at that point.  

I like Jones, I think it's been an amazing company to work for, for a lot of people that get the chance to take over an office.  But like BFP said new new's have a slim to none chance of making it based on their current compensation.  They are literally starving those people out once their pay is cut off.  They have lost a lot of good potential FA's because of this and they have kept a lot of idiots because they were handed a $20 mill office (not saying everyone who gets an office is an idiot, but some are) and those are the same idiots that don't have what it takes to meet their new expectations. 

[quote=Spaceman Spiff]

B24 - You are absolutely correct that indy FAs get a better payout, even after expenses.  But Jones isn't an indy shop.  The only thing about Jones that resembles an indy setup is our one man and an assistant setup.  So, BFP's contention that 40% payout isn't good, is only looking at Jones vs indy.  When you look at Jones vs wires/regionals/banks 40% is average.  If I were to just simply look at my trailing 12 months expenses on my P&L, which includes my 40% payout, and divide it by my T12 gross, it's over 80%.  So, in essence, Jones got to keep 20% in profit from my operations last year.  I don't think that's too bad for all of the stuff behind the scenes that they do.  The fact that I got to see 40% hit my paycheck, but didn't really have to think about any of the rest of it, doesn't seem unreasonable to me.   

ND - Who pays 30% to someone just to prospect?  

So what you're saying is that if I were to start my own brokerage firm tomorrow, I should hire FAs with a 30% payout and their only function would be to work with clients.  I should hire prospectors and give them 30% for their prospecting efforts but all they're doing is smiling and dialing and setting apointments.  They don't ever touch money or make recommendations.  I should keep 40% for supplying my services as the B/D and the office space.  I could bring in 3 $1 mil producers, keep $1.2 Mil for myself, give them everything they want, including someone to generate leads for them, and they'll be happy netting $300K? 

Am I reading that correctly?   

[/quote]

No, you're right you can't compare.  My point is that existing FA's subsidize so much excess cost (technology that only half the FA's use, recruiting, hiring, training, etc.), that Jones cannot "afford" to increase payouts for the people that deserve it.  I think 40% flat for newbies is a pretty good deal.  No grid.  That's not bad.  But the 250K-750K producers (most everyone) get screwed in good years, and the top producers do comparable to the wires in real good years (when we are in high bonus brackets), but do really lousy in bad years.  Can you imagine producing $1mm and getting a 40% payout??  Anywhere??  And I am just comparing that to other wires, not indies.  Personally, I think bonuses for big producers should be based srtictly on THEIR performance, NOT the firms performance.

My biggest beefs with the Jones model and a reason I think we burn advisors so quickly.

1. No real supervision of newbs.  -  Help them learn, grow, and prosper.  Don't just say 25 a day and walk away

2. It's lonely working out of your house and leads to many distractions

3. 1st year draw blows.  It provides you with VERY little time to get the airplane flying.  I know their are bonuses and that's great but wow they are far away.

4. No vets really want to help a new guy because in a small town they are your competitors.

[quote=SuperMan]

My biggest beefs with the Jones model and a reason I think we burn advisors so quickly.

1. No real supervision of newbs.  -  Help them learn, grow, and prosper.  Don't just say 25 a day and walk away

2. It's lonely working out of your house and leads to many distractions

3. 1st year draw blows.  It provides you with VERY little time to get the airplane flying.  I know their are bonuses and that's great but wow they are far away.

4. No vets really want to help a new guy because in a small town they are your competitors.

[/quote]

And $1 in production could mean the difference between a $7000 bonus and zero.  Granted, it's not usually that close, but I have seen guys "stretch" (aka "slam a client into something") and come up few hundred short of a bonus.  That's a big kick in the wad.  The bonuses should be prorated, like most bonuses in this world.

I am going to be one of thoes Jones reps who leave at the end of this month.   New/New.   1 of only 3 FA who did not get any kind of goodknight or legacy in my class.    working out of the home sucks.   I just do not know how this is done.   I know 12,000 FA did this before me but I am at a loss on how they made it. .   I am only getting small accounts.   My hats off to all of you who were able to start a business with jones.  but I was not able to do so and I wanted this to work for me.     I have several objections to the statements  about jones not choosing quality advisors.   I do not think this is the issue considering myself and others that have left.   Perhaps times were different in the past which made this job acheivable but it is absoutely brutal at this time.    I am going to be the 17th FA from my region who leaves this year.  

I would not suggest anyone start with jones unless there is an open office with assets and even with assets you WILL still need to prospect.    25 contacts a day is impossible when you are new/new working out of your home with zero admin support 5 days a week in the summer and winter.     I also have learned that FA's at jones mislead and about how they did it.     I am confident  very few made it without taking assets.     My breakthrough class only had a handfull of FA who did not get any assets.  The rest got a least crumbs if not a full meal of assets.   They are in the silverspoon club. 

Check this out.   One FA during a call in training session said he started door knocking at 730 in the morning.   And to top it off he used this question for everyone on the phone call to hear.     mind you he was role playing with a lady.     "is it just you here?"...........   But he is making it.   All the more power to him.  

I'm calling bullsheet on you Rewster.  For a variety of reasons.

 -How much admin. support does a guy really need that is new/new and only opening small accounts. 

-What else do you have to do all day except prospect if you work out of your house?  I never made so many contacts as those days. 

- You are only working 5 days per week? And you are failing and working 5 days per week?

-I have done just fine without assets at Jones and know MANY who have.  It's a tough road but not impossible.

-Door knocking business owners at 7:30am is not a bad idea. Do you even start work before 9am?

The reason for your failure is not Edward Jones.  It's you.  This is a tough job made for men.

What is this, a Jones website? Full of failing Jones reps and the ones who drink the kool-aid?

I do have to agree that it's not Jones' fault if you fail.  This is a tough business. 

I would say it is a business for two types of people though, not necessarily "men" (especially since there are women who produce more than this board combined).

Sheep - Who put their head down, do what they are told, follow the leader and succeed based on grit and putting one foot in front of the other

Innovators - Those who figure out how to build a mousetrap that works for them.