Your Real Net Payout not Gross
Just finished my 2009 book keeping and happy with a good year. Not a great year, but a good one. Grew assets by 17 million and fee based revenues by 23%.
But after all the "overides" "expenses" all the crap (not your gross, but your paycheck) What are you all taking home? Still making more than at the wire as an indy. but it sure adds up Corporate overide Branch overide Corporate expenses Rent Office Expenses Office salaries . . .hmmmmmm which company has the best deal out there?Jones.
I net out 65%, but I don’t have any company expenses-everything is covered (everything, we do not have one single haircut, fee etc)…
[quote=shantom1]I net out 65%, but I don’t have any company expenses-everything is covered (everything, we do not have one single haircut, fee etc)…[/quote]
After you pay for your office? Or are you working from your house
I do not have to pay for the office/assistant/expense account, the firm does out of the 35% they keep (which puts me on par with an indy)…
[quote=vbrainy] Just finished my 2009 book keeping and happy with a good year. Not a great year, but a good one. Grew assets by 17 million and fee based revenues by 23%.
But after all the “overides” “expenses” all the crap (not your gross, but your paycheck) What are you all taking home?
Still making more than at the wire as an indy. but it sure adds up
Corporate overide
Branch overide
Corporate expenses
Rent
Office Expenses
Office salaries
. . .hmmmmmm which company has the best deal out there?[/quote]
I just noticed, you started the post but never said your net %…
We clear through NFS. I would rather not mention my BD. We are classified by most wholesalers as an indy shop but I am W2’d w/benefits. It is quite a good program. Took one hell of a gamble a few years ago and it paid off.
I don’t get the comments about how much assets I have or whatever. In NY my book is not big, seriously. I know bank reps in local branches here who manage more. It might be more than the average rep in other areas but it does not go as far in NY…
BTW, mlgone- LOVE the avatar…
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don't have to agree with him, but using your signature line to belittle him is just plain childish. You're not the first to do this, and singling you out is unfair, so I'll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I'll give you a pass on trolls) is getting old. I'm not sure who started this trend, but I'm ready to see it stop.BTW, mlgone- LOVE the avatar…
…and to get back on topic, my payout as a tenant indy was running 68%. I’ll let you know what it is for 2010 as the owner of my own office, but you’ll have to wait a bit for that number.
I pay my reps that work out of the office 75%. They have to pay for their registration fees and E&O. We split marketing 50/50.
I run a 70% net shop with LPL. I have two part-time assistants one of whom is my wife. That number by the way is after everything…it is net net before personal taxes.
BC, what coverage do you have for hours? 9-5 split between the two? 8-4? Everyday? My BOA only work about 30 hours a week, and I rarely get an on-call to cover her. It works because we have two FA's in my office, so we can generally answer all the calls when she's out.I run a 70% net shop with LPL. I have two part-time assistants one of whom is my wife. That number by the way is after everything…it is net net before personal taxes.
8:30-4 Mon-Thurs and Friday 8:30 to 1.
Fridays clients have been trained that we tend to leave early (I usually leave at 3-3:30)and its amazing they think its great and its almost always slow. It works out to about 35 hrs a week between the two. As we speak its less because we had a XMAS suprise. Our office was flooded out and we haven't been able to work out of the office for two weeks while repairs are happening. Fortunately I was insured and business overhead and contents are covered. My production though has suffered. Not the way I wanted to start out the new year. By the way...with my current experience it has been very easy to say to clients and prospects...You insure your car, your home, your business, why would you not insure your most precious asset when you retire...YOUR INCOME!! It's got people thinking...[quote=shantom1] [quote=vbrainy] Just finished my 2009 book keeping and happy with a good year. Not a great year, but a good one. Grew assets by 17 million and fee based revenues by 23%.
But after all the "overides" "expenses" all the crap (not your gross, but your paycheck) What are you all taking home?
Still making more than at the wire as an indy. but it sure adds up
Corporate overide
Branch overide
Corporate expenses
Rent
Office Expenses
Office salaries
. . .hmmmmmm which company has the best deal out there?[/quote]
I just noticed, you started the post but never said your net %....[/quote] last year 60%
NiceI run a 70% net shop with LPL. I have two part-time assistants one of whom is my wife. That number by the way is after everything…it is net net before personal taxes.
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don't have to agree with him, but using your signature line to belittle him is just plain childish. You're not the first to do this, and singling you out is unfair, so I'll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I'll give you a pass on trolls) is getting old. I'm not sure who started this trend, but I'm ready to see it stop.[/quote] Thanks for your input on the maturity of the forum. I don't get involved in many spitting contests b/c this is the internet. I will tell you that the thread where ml got the quote from was the most insane thing I have ever seen. I think MlGONE throwing it in Spiff's face is more than appropriate given that Spiff had just stamped his name on the most non christian "My God is right" kind of talk. It was sad to see from someone who thinks they are religious. It was so ridiculous that I don't read his posts AT ALL.[quote=shantom1]BTW, mlgone- LOVE the avatar…
Left a wire 1 year ago, was a miserable place after 16 years of hard work, they really don’t give a rats a$$ about anyone except the big brokers and executives.
Went to a very small regional of sorts, they pay for pretty much everything the wires did, no pressure no underlying agendas, my payout after last year averaged 68%. The thing I can tell you is that my take home was more than double what it would have been at any wire with the same production.
Most client followed, and I’m getting referals and more new business that I ever did at a wire.
[quote=Indyone] [quote=shantom1]BTW, mlgone- LOVE the avatar…
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don’t have to agree with him, but using your signature line to belittle him is just plain childish. You’re not the first to do this, and singling you out is unfair, so I’ll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I’ll give you a pass on trolls) is getting old. I’m not sure who started this trend, but I’m ready to see it stop.[/quote]
the guy is a self admitted freak and hopefully I am helping him??? I respect your opinion but I make my own choices…He chose to admit this racist thoughts about gay people and I want to remind him everyday of what he thinks he is and the rest of us who know what he is…
If Spiff wants to profess his Christianity, I respect that." …So do I but his way was to call 'Gay’s Creepy". I took offense to that.
Thanks Godfather…I get your opinion…BUT I got my own. That sh*t is just backward. Read the tagline.[/quote]
ml - you know I got your back on most things… but I do have to say that comments on gay people aren’t really considered racist.
[quote=Moraen] [quote=mlgone] [quote=Indyone] [quote=shantom1]BTW, mlgone- LOVE the avatar…[/quote]
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don't have to agree with him, but using your signature line to belittle him is just plain childish. You're not the first to do this, and singling you out is unfair, so I'll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I'll give you a pass on trolls) is getting old. I'm not sure who started this trend, but I'm ready to see it stop.[/quote]
the guy is a self admitted freak and hopefully I am helping him???? I respect your opinion but I make my own choices.......He chose to admit this racist thoughts about gay people and I want to remind him everyday of what he thinks he is and the rest of us who know what he is........
If Spiff wants to profess his Christianity, I respect that." .......So do I but his way was to call 'Gay's Creepy". I took offense to that.
Thanks Godfather.........I get your opinion........BUT I got my own. That sh*t is just backward. Read the tagline.[/quote]
ml - you know I got your back on most things... but I do have to say that comments on gay people aren't really considered racist.
[/quote] Morean, aren't you the self professed monitor of this forum who wants everyone to stick to the topic? Why don't you walk your own talk??? Do as I say and not as I do??? Your post has nothing to do with the topic. . . .or maybe you are not even in production and you don't have a net payout?
[quote=vbrainy][quote=Moraen] [quote=mlgone] [quote=Indyone] [quote=shantom1]BTW, mlgone- LOVE the avatar…[/quote]
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don't have to agree with him, but using your signature line to belittle him is just plain childish. You're not the first to do this, and singling you out is unfair, so I'll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I'll give you a pass on trolls) is getting old. I'm not sure who started this trend, but I'm ready to see it stop.[/quote]
the guy is a self admitted freak and hopefully I am helping him???? I respect your opinion but I make my own choices.......He chose to admit this racist thoughts about gay people and I want to remind him everyday of what he thinks he is and the rest of us who know what he is........
If Spiff wants to profess his Christianity, I respect that." .......So do I but his way was to call 'Gay's Creepy". I took offense to that.
Thanks Godfather.........I get your opinion........BUT I got my own. That sh*t is just backward. Read the tagline.[/quote]
ml - you know I got your back on most things... but I do have to say that comments on gay people aren't really considered racist.
[/quote] Morean, aren't you the self professed monitor of this forum who wants everyone to stick to the topic? Why don't you walk your own talk??? Do as I say and not as I do??? Your post has nothing to do with the topic. . . .or maybe you are not even in production and you don't have a net payout? [/quote]
Maybe I'm not.
And maybe you're lying about yours. I was responding directly to ml.
From the other thread it is pretty obvious I don't mind speaking directly to someone who takes things off topic.
As for my net payout - I deal in revenue and profit, not net payout, since technically I receive 100% of all fees.
Oh, and as for the advisors who work for me - their payout ranges from 60 to 80%.
ICE, I agree with you. I know “all firms do it”, but I can’t stand the nickel and diming. However, it’s tough in the brokerage industry. The reason is because of different compensation/fee structures. There are clients that buy nothing more than CD’s or some stocks or bodns in their account, and hold them for years, essentially costing the firm money after a while. Then there are clients that trade actively or participate in a fee-based program that over-compensates the firm. So, like income taxes and social security, the “active” clients compensate for the “non-active” clients. IMHO, if you are in a fee-based program, you should pay NO fees, no IRA, no debit card, no checking, no ACAT out, no wire transfer, etc. (obviously you have to have limits on transactions, but the “service” itself should be free).
I have actually paid for a few clients’ ACAT fees (incoming), because they got screwed at their prior firm, then pay a fee or commission at my firm. The last thing I want is for them to have to pay a nasty $75 fee (often on multiple accounts). So if they are going to be a good client (fee-based), I will sometimes reimburse the fee (it usually gets ACAT’d over with the rest of the stuff).
Fees are just one more reason people get irritated by our industry.
I’m at least glad Jones has waived IRA fees for Advisory clients (and/or clients w/over 500K). It’s a start.
I pass ticket charges on to clients. They aren’t much. There are no IRA fees or any of that.
[quote=iceco1d]I know you don’t use mutual funds, but SUPPOSE you did, and suppose it paid a 12b-1 fee. What would happen to that fee? Would you get it? Would the client get it rebated?
[/quote]
12b-1 fee goes to the custodian. Then is is up to the advisor to rebate it or not.
Ice you make some good points and they are things that anyone looking into going indie should be aware of. Honestly, i didnt really know enough to ask all the right questions, or more accurately i was made aware of all the nuisance fees, tix charges, 12b-1 fees that i dont get because they dont cover the ticket charge, but didnt think about it hard enough.I realize now how much they add up towards reducing my real payout. I dont think it would have changed my decision though.
My B/D rebates 12b-1 fees back to the client in fee based accounts. Most of my busienss is in fee based platform with no tix charges on the first 50 trades, so that helps me. I looked at year end numbers and my net net payout after everything including rent is 63% of gross The gross # i am using includes phantom gross that i am credited with, which is the program fees on the fee based accounts that the B/D haircuts. So i think its a pretty true number. The only thing not included is the 12b-1 fees that the broker dealer keeps because the ticket charge is not covered. Also its the first six months so it includes about $2500 in startup costs (computer, stationary, etc. No matter how you look at it i am better off than at the wire, where i would have been at 37%Bob, I’m estimating my solo office payout to be similar to yours (about 63% of gross).
Totally netted to the bottom of schedule C. I haven't exactly been building an empire (working that hard to capture new AUM). With the fixed costs, the next dollars earned would all be profit (until I hired the next helper), so the payout % would go up pretty easily by bringing in a little more AUM. Virtually no one bothering me. The challenge is to challenge myself to grow the gross, and effective payout % over the fixed costs in 2010, and beyond. 10% growth a year would have a huge effect on the value of the business at my retirement. But I'm not interesting in managing an empire or working that hard. What a challenging opportunity, "recognition" and motivation, though, have to come from within.Milyunair - same for me. I know right now my fixed costs run a little less than 10% of my gross. Add 20% to my gross and that number becomes more like 8%. And so on. Of course, double the business and the number is 5% but when the business doubles you need to add overhead in the form of admin help.
The biggest challenge being indie, especially as a one man shop, is, as you said, getting and staying motivated and disciplined. Discipline has been a big challenge for me. But the last two weeks i have been ramping it up, on the phone every day, hopefully i can keep that going- no - i WILL keep that going, and that will get me the 5% number, which will get my net closer and closer to70%. Home Run.Ice - i agree, i dont understand the point of charging a ticket charge on trails. Its not like they are processing a trade.
And if could just provide clarity, it would take them that much further away from the wirehousesThere are new firms out there saying the flat fee every month is $xxx.00 and then you get 100%...Sorry, going to vent this…
A company like LPL will give you a “93% payout.” Awesome. Wait, what about program fees? What about ticket charges? Why not just say your payout is 85%, no b.s. 12b-1s get paid out or rebated to the client. No program fee. No ticket charges. Can’t happen I guess.
How about custodial fees? The fund companies can do it for $10 a year? So can the annuity companies. And they can typically waive them @ $50K. So the brokerages can’t do it for the same? Nah. Gotta be $25, or $35. Or maybe even a little bit more. Why? Because they can, and because “everyone else is doing it.”
ACAT fees? Termination fees? Seriously? My firm just implemented this - and although I haven’t lost a client yet, and I probably don’t care what they have to pay when/if one fires me, but wtf? $50 to leave? Some firms are $75 or $100? Ridiculous. Why? Again, because they can, and everyone else does it.
How about those really handy-dandy technology fees? At least the EDJ people get something for theirs. What does LPL give you for $100/month? Because I was at Staples yesterday, and I’ll tell you what…I could buy a metric-ton of software for $1200 a year! And why do they do it? Because everyone else does it and we sit still for it.
What a crock of sh!t.
I think a firm could really clean house if they were just honest with their FAs and their clients. It’s a 75% payout. No b.s. Or, the fee is 1.25% per year. Period.
Yeah but instead they jacked up their other fees... I can't believe they make people pay $75 for a TODICE, I agree with you. I know “all firms do it”, but I can’t stand the nickel and diming. However, it’s tough in the brokerage industry. The reason is because of different compensation/fee structures. There are clients that buy nothing more than CD’s or some stocks or bodns in their account, and hold them for years, essentially costing the firm money after a while. Then there are clients that trade actively or participate in a fee-based program that over-compensates the firm. So, like income taxes and social security, the “active” clients compensate for the “non-active” clients. IMHO, if you are in a fee-based program, you should pay NO fees, no IRA, no debit card, no checking, no ACAT out, no wire transfer, etc. (obviously you have to have limits on transactions, but the “service” itself should be free).
I have actually paid for a few clients’ ACAT fees (incoming), because they got screwed at their prior firm, then pay a fee or commission at my firm. The last thing I want is for them to have to pay a nasty $75 fee (often on multiple accounts). So if they are going to be a good client (fee-based), I will sometimes reimburse the fee (it usually gets ACAT’d over with the rest of the stuff).
Fees are just one more reason people get irritated by our industry.
I’m at least glad Jones has waived IRA fees for Advisory clients (and/or clients w/over 500K). It’s a start.
So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.I make 90000%
[quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anywayIce, yeah, I've been trying to get everything out of 12b1 and into wrap just to clear things up for my clients and myself.
So, by cutting out 12b1 fees (using mainly ETFs), I raised the wrap fee on smaller accounts. Smaller accounts I tell, " we'll be using indexes without 12b1s, and making the fee visible." On smaller accounts, I'm getting a raise, on larger accounts, without 12b1 mutual funds, I'm taking a pay cut. If you look at the admin fees on wrap accounts, and then multiply by the b/d payout, and all of the other charges, the b/d is doing really well. But it is nice having the b/d brand and compliance, and keeping insurance licenses, and being left alone. Expensive, being free and solo, but very stable and flexible.[quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] But that is questionable too, because there is a lot of things I can write off as a business owner that an EDJ, Wirehouse, W-2 employee can't, so comparing before taxes doesn't work either..Just a note, I’m at 68%, the company pays all expenses that a wirehouse would pay.
[quote=chief123][quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] But that is questionable too, because there is a lot of things I can write off as a business owner that an EDJ, Wirehouse, W-2 employee can't, so comparing before taxes doesn't work either..[/quote] Agreed. But overall it's the best way to compare apples-to-apples. But at Jones/wirehouses, there are much less out-of-pocket costs, so the tax affect is smaller than you might think (a little bit of postage, some marketing, a few office expenses, etc.). That's one of the reasons the payout is lower - the firm pays for most of the costs: rent, assistant salary, tech, ticket charges (client), licesnsing, training, payroll taxes (ER), paper, toner, etc. You can simply "gross down" your deductible expenses that are "out of pocket" at wires if you really need to compare down to the nickel. Or I suppose you could just compare after-tax, but then you run into all sorts of complications....owning real estate, how you file your taxes (joint, single, etc.), business structure, other deductions (mortgage, kids, etc.), some people are honest on their taxes while some are not (yes, some out there write off nearly everything under their business). Really, we are talking about comparing one indy setup to another, so the tax implications should be about the same.B24, in making the move to independence it is hard NOT to compare to the take as an employee. For example, health insurance: you have a cost as an employee, so I always try to compare the additional cost an indy might have vs. a subsidized plan at a large company.
In other words, as a business owner the whole cost is real but in comparing to the "wirehouse" you can't compare it to zero (since everyone pays something as an employee). To a lesser degree, lunches with clients, etc. I suspect the tax benefits of independence are slightly overrated because they are offset by employer side payroll taxes (which adds 7.65% to start).[quote=Cowboy93]B24, in making the move to independence it is hard NOT to compare to the take as an employee. For example, health insurance: you have a cost as an employee, so I always try to compare the additional cost an indy might have vs. a subsidized plan at a large company.
In other words, as a business owner the whole cost is real but in comparing to the "wirehouse" you can't compare it to zero (since everyone pays something as an employee). To a lesser degree, lunches with clients, etc. I suspect the tax benefits of independence are slightly overrated because they are offset by employer side payroll taxes (which adds 7.65% to start). [/quote]Depends on how much you are paying yourself. Set up as an S-Corp, you don't pay as much as you think you do.
In response to the idea of admin expenses, tech charges, etc., my “payout” from RJ is 73%. This is after the admin charges on advisory, all ticket charges, and their fixed monthly tech charge.
With moderately high expenses (i.e. running a full office with well paid staff), my net net right now is still 40% (which I sustained through the entire downturn). As I surge to the next level, and say add $100k of gross, it adds 73k to my bottom line and my expenses stay fixed. I expect it to climb to about 50% within 12-24 months.
Next to Jones, where I was at about 35%, no bonuses, no LP, but got trips, payout is about a wash, but tax treatment and flexibility are much better.
The answer is very dependent on gross revenue minus expenses, which are going to vary widely depending on the set up.
[quote=Cowboy93]B24, in making the move to independence it is hard NOT to compare to the take as an employee. For example, health insurance: you have a cost as an employee, so I always try to compare the additional cost an indy might have vs. a subsidized plan at a large company.
In other words, as a business owner the whole cost is real but in comparing to the "wirehouse" you can't compare it to zero (since everyone pays something as an employee). To a lesser degree, lunches with clients, etc. I suspect the tax benefits of independence are slightly overrated because they are offset by employer side payroll taxes (which adds 7.65% to start).[/quote] I agree. For someone serious about the move, you really have to do an "all-in" comparison. It's tough to illustrate on a forum like this, as everyone's situation will be a little different. And some of the differences are a little more subtle (401K match, profit sharing, payroll taxes, income taxes, deferred comp, etc.).Do you mind me asking your gross production, and if any of it is attributable to other FA's (that you are giving a higher payout to).In response to the idea of admin expenses, tech charges, etc., my “payout” from RJ is 73%. This is after the admin charges on advisory, all ticket charges, and their fixed monthly tech charge.
With moderately high expenses (i.e. running a full office with well paid staff), my net net right now is still 40% (which I sustained through the entire downturn). As I surge to the next level, and say add $100k of gross, it adds 73k to my bottom line and my expenses stay fixed. I expect it to climb to about 50% within 12-24 months.
Next to Jones, where I was at about 35%, no bonuses, no LP, but got trips, payout is about a wash, but tax treatment and flexibility are much better.
The answer is very dependent on gross revenue minus expenses, which are going to vary widely depending on the set up.
Great discussion and perspective on bottom line payouts.
So much of the industry is based on trying to get us to change b/ds, or go RIA, or whatever. When you focus on the net % payout, and what it takes to push through fixed costs and increase pure profit, it's easy to see what's important to focus on in 2010. Keep the energy focused in 2010.I recalculated my bottom line payout to be about 50% (not 63%). I strongly urge you to hit your goal. Most of what I add this year will be profit, won't need staff or other overhead. A huge incentive to get up to 60% bottom line payout ( GDC/all costs).In response to the idea of admin expenses, tech charges, etc., my “payout” from RJ is 73%. This is after the admin charges on advisory, all ticket charges, and their fixed monthly tech charge.
With moderately high expenses (i.e. running a full office with well paid staff), my net net right now is still 40% (which I sustained through the entire downturn). As I surge to the next level, and say add $100k of gross, it adds 73k to my bottom line and my expenses stay fixed. I expect it to climb to about 50% within 12-24 months.
Next to Jones, where I was at about 35%, no bonuses, no LP, but got trips, payout is about a wash, but tax treatment and flexibility are much better.
The answer is very dependent on gross revenue minus expenses, which are going to vary widely depending on the set up.
One of my clients is set up as an S-corp ... he's one of the reasons I started thinking about going independent. His company creates nearly 700000 in profits a year; he "earns" $60K as a manager. The rest of the profit flows to him outside of payroll, either as dividends, costs absorbed by the company or profit-sharing. He's a pretty savvy guy.
Depends on how much you are paying yourself. Set up as an S-Corp, you don’t pay as much as you think you do.
Did anyone ever get a definitive answer on this bonusing question (recent thread)? Like, an IRS letter of determination in which an FA bonuses 1099 income and it’s okay with the auditors? Is this discussion all still anecdotal?
Do you mind me asking your gross production, and if any of it is attributable to other FA's (that you are giving a higher payout to).[/quote][quote=LuvIndy]In response to the idea of admin expenses, tech charges, etc., my “payout” from RJ is 73%. This is after the admin charges on advisory, all ticket charges, and their fixed monthly tech charge.
With moderately high expenses (i.e. running a full office with well paid staff), my net net right now is still 40% (which I sustained through the entire downturn). As I surge to the next level, and say add $100k of gross, it adds 73k to my bottom line and my expenses stay fixed. I expect it to climb to about 50% within 12-24 months.
Next to Jones, where I was at about 35%, no bonuses, no LP, but got trips, payout is about a wash, but tax treatment and flexibility are much better.
The answer is very dependent on gross revenue minus expenses, which are going to vary widely depending on the set up.
Around 230k gross. I left Jones when Seg 3, which in my opinion is better than waiting until you're Seg 4 and get reluctant to go. While the payout doesn't ramp up as fast, I'd rather build the same business outside of Jones than at Jones, and you see the benefits of being Indy that much quicker.
I could make these numbers much better if I rented a closet and was a one man shop, but that would be a step backward in my clients' minds, and I run my business so it's ready for twice the capacity when it comes.
One of my clients is set up as an S-corp ... he's one of the reasons I started thinking about going independent. His company creates nearly 700000 in profits a year; he "earns" $60K as a manager. The rest of the profit flows to him outside of payroll, either as dividends, costs absorbed by the company or profit-sharing. He's a pretty savvy guy.[/quote][quote=Moraen]
Depends on how much you are paying yourself. Set up as an S-Corp, you don’t pay as much as you think you do.
This loophole is closing and the majority of audits going forward are going to be S Corps doing exactly this. He'd be best off treading lightly.
Yep, that's what I heard.
[quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] That is what I am getting at. And really, I have looked at other businesses---65% at the end of the day is not bad.Very good point. And yes your net goes up when you generate more revenue because things like Rent and Office Salaries are fixed and will not go up.In response to the idea of admin expenses, tech charges, etc., my “payout” from RJ is 73%. This is after the admin charges on advisory, all ticket charges, and their fixed monthly tech charge.
With moderately high expenses (i.e. running a full office with well paid staff), my net net right now is still 40% (which I sustained through the entire downturn). As I surge to the next level, and say add $100k of gross, it adds 73k to my bottom line and my expenses stay fixed. I expect it to climb to about 50% within 12-24 months.
Next to Jones, where I was at about 35%, no bonuses, no LP, but got trips, payout is about a wash, but tax treatment and flexibility are much better.
The answer is very dependent on gross revenue minus expenses, which are going to vary widely depending on the set up.
[quote=LuvIndy]
LockEDJ:One of my clients is set up as an S-corp ... he's one of the reasons I started thinking about going independent. His company creates nearly 700000 in profits a year; he "earns" $60K as a manager. The rest of the profit flows to him outside of payroll, either as dividends, costs absorbed by the company or profit-sharing. He's a pretty savvy guy.[/quote][quote=Moraen]
Depends on how much you are paying yourself. Set up as an S-Corp, you don’t pay as much as you think you do.
This loophole is closing and the majority of audits going forward are going to be S Corps doing exactly this. He'd be best off treading lightly.
[/quote]
That is a huge one. I pay myself $60k and then bonuses quarterly, then distributions, profit-sharing. They can audit to their heart's content. As long as it follows the tax code, it's not a big deal. Now, a profit of 700k and 60k in salary is a pretty big gap. THAT might get some auditors' panties in a wad.
Just so you don’t find yourself in a place where you have to go back and pay missed payroll taxes and income taxes, and penalties.
I have been wondering about the IRS audit precedents, pro and con. Specifically related to this industry. By hearsay only, I have been told by some b/d colleagues not to do it. The b/d won't 1099 your LLC. Why? There must be a body of knowledge somewhere, pro or con. The only thing you avoid is SS payroll taxes, right? I'm not an expert, just asking. You're avoiding SS taxes on 47k, $7,500k in SS taxes? Am I missing anything here? You'd have to net out a lower SS pension at retirement ( assuming it's not all taxed away). Or does 60k pretty much max out your SS retirement benefit, I confess to not knowing, but would depend on how old you are and how much you already contributed, I imagine.[quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] The one thing i disagree with here is payroll, that is, payroll that is attributable to the FA himself (other than self employment tax);. The idea here (i think) is to be able to compare what one would get at a wire to what one is getting as an indie. The payroll to the FA is part of the net payout, no matter what you call it.Milyunair - the reason the B/D wont 1099 your llc (or s corp for that matter) is that FINRA doesnt allow it. They are required to pay the FA directly.
You are right, you pay less SS tax, but it does affect your ss at retirement. I am, shall we say, "older" and prior to going indie was maxing out on ss. My accountant told me that the affect it would have on my SS payments, at this point would be minimal, based on teh credits i already have. Of course if you run those reduced w-2 numbers for most of a career, it would have a bigger effect. What i am not clear on is how we can have our personal 1099 income flow thru to our LLC or S Corp. I know its done, i have heard from people who do it and have had no problem, and in fact prior to joining my B/D they had me meet with their inhouse consultant who told me it is done as standard practice. But i dont understand it.Thanks, interesting. I looked at this about ten years ago, I think this is one of a couple of interesting tax strategies, more power to small business owners everywhere. There need to be incentives to be self employed.
[quote=Sportsfreakbob][quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] The one thing i disagree with here is payroll, that is, payroll that is attributable to the FA himself (other than self employment tax);. The idea here (i think) is to be able to compare what one would get at a wire to what one is getting as an indie. The payroll to the FA is part of the net payout, no matter what you call it.[/quote] Bob, I agree. I was only referring to non-FA payroll.Source URL:https://www.wealthmanagement.com/forums/whats-firms/your-real-net-payout-not-gross