Going Independent, need advice

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Dec 6, 2006 2:58 pm

NOTE:  I just posted this accidentally in the "What's up at Firms" section and I'm reposting here in case it gets more viewers in this section.



Been reading for a few months, first time post and looking for advice.


I am currently a Seg 3 at EJ and for various reasons think I will be leaving to go independent within 1 year.  Below are my specifics, any advice will be appreciated.


Can sell was 2 yrs ago.  Took over office of 10m, currently at 20m.  I will take 8-14.  (Hopefully 14)


I have one year and 25k left on intial 3 yr contract which I believe Jones will go after.  Best guess is that I will have to settle for half of that.   


Gross income for 06 is 46k less 8k health care (premiums and out of pocket) less 5k office expenses.  So I made 33k before taxes.  I was making 60k at old job.  I am a CPA and one reason I came is that I was told with 10m in assets that getting to 100k in year 3 would be pretty easy.


Among many, two of the relevant factors for leaving are:


1. To be able to offer tax services both as a revenue source and as a referral source.


2.  I want to be able to share fees for referrals with Attorneys.  I have a close friend who is an Estate Attorney that wants to enter an agreement in addition to a few others I believe would be interested. 


A Raymond James Broker has office space and assistant to share and is offering to let me come with a 15% override on my production. 


My biggest question (among many you can probably infer) from this post is; Should I take the jump now or in a year when my liability to Jones is ended and my assets will be larger to help support the move. 


I estimate I can generat 8-10k in tax revenue the first year with at least 10k growth each future year.


Note:  I am anxious to get started, especially with Tax Season approaching.  I am in my early 30's with a family of four.


Again, thanks in advance for your help.  I will not be able to respond to questions or comments until this evening because I will be back in my office with no access.

Dec 6, 2006 4:44 pm

I was in a similar spot as you, so here's my take:


1.  Yes, wait a year and get rid of the training obligation before you go.  I'm not sure that the total YOS to eliminate the training costs is three years...someone on the inside reading these boards should be able to clarify, but I've heard three years sometimes and four years at other times.


2.  You can only share fee-based revenues with attorneys and CPAs unless they are fully licensed and last I looked, Raymond James wasn't sure they wanted to continue that program.


3.  I do a bit over $20K in tax/accounting work and I am to the point that I wish I'd never seen it.  I bust my tail for this 20K...spend probably 200-250 hours for it, when I could drop one decent annuity or life policy and make the same with maybe 4-5 hours involved.  Tax/accounting work may help pay the bills today, but it will only get in your way later when there's serious money to be made.  Think hard about starting that service...it's much harder to stop later.  I share office space with a group of accountants and am hoping to sell my accounting practice completely in the near future...if my clients will allow me...


4.  The Ray Jay guy is being very generous at only taking 15%.  More typical is 25-40% of gross for providing office space and an assistant.


5.  In addition to greatly reducing or eliminating the amount that Jones will try to extract, an extra year gives you an opportunity to really solidify the client relationships for those clients that you wish to take along with you.  You'll have to work extra hard on newer relationships to impress the clients and gain their trust.  While you're preparing, you should obtain and read Robert Fragasso's book.  Buy it at www.fragassogroup.com.  It will greatly aid you in your preparation.


6.  Eventually, you should try to get your CFP...a CPA/CFP is a very good combination for this business.


From a guy who's been there, it's a great move if you make it stick, but it requires careful planning, attention to detail and a lot of hard work both before and after the move...good luck...

Dec 7, 2006 10:25 am

Gad,


I think that you can make up the difference in income to more than compensate for the $$ EDJ would try to recoup for training costs.  I also believe you will be much happier without the GPs constantly looking over you shoulder to see how you're doing.


What area of the country are you in?



It's not a job if you love what you do!!

Dec 7, 2006 10:33 am

Indyone, thanks for the advice. 


Couple of follow up questions if you get a chance. 


One of my big hangups is why add 5mill in assets this year at EJ only to lose half of it when I leave.  Plus not being able to put them into a fee based program doesn't make things easy either. 


On the tax work.  I clearly see your point and in 5-10 yrs will probably feel exactly the same way.  However, at about $100 per hour it's very tempting when your current income is low, especially when I make the transition to independent.  I don't know if I will be able to get by without it since I have already used up most of my savings.


Did you find the tax work ever allowed you to gain additional assets?


Also, my contract is for 3 years for sure.


I actually talked with the head of the referral program at Ray James a couple months ago, and he acted like it was full steam ahead.  Although I understand he wouldn't exactly disclose to me if they were having issues. 


Our state requires series even Cpa's and attorney's to pass the 65 to share and that would be the plan.


I am planning on taking the CFP before too long, and I ordered the book, esp since I read the Nick Murray testimonial, who is one of my favorites.   


Thanks so much for taking the time to help a newbie.

Dec 7, 2006 1:39 pm
gad12:

Indyone, thanks for the advice. 


Couple of follow up questions if you get a chance. 


One of my big hangups is why add 5mill in assets this year at EJ only to lose half of it when I leave.  Plus not being able to put them into a fee based program doesn't make things easy either.  That's an issue, but what makes you think you'll lose half of it?  If you service them well, and make a strong bond, your good ones will follow.  As far as fee-based, since it's rumored that EDJ will be soon adding a fee-based platform, I would consider recommending C-shares for your larger new clients as much as possible in anticipation of migrating those clients to a fee-based platform.  I would tell them that you anticipate going to a fee-based platform in the near future and C shares are an excellent mechanism to later migrate to a superior platform.  You don't have to tell them that it might not be at EDJ.


On the tax work.  I clearly see your point and in 5-10 yrs will probably feel exactly the same way.  However, at about $100 per hour it's very tempting when your current income is low, especially when I make the transition to independent.  I don't know if I will be able to get by without it since I have already used up most of my savings. Did you find the tax work ever allowed you to gain additional assets?


This happened some, but I found that for me, the opposite happened more, perhaps because I don't hold myself out as a tax preparer and don't take new tax clients.  As soon as they see I'm a CPA, they are asking if I can do their taxes also, at which time, I happily refer them to my CPA office partner.  Also, I understand that tax work may be a necessity as you start out...I would just keep in mind that you may later want to exit this business, so don't make any grand promises to your tax and accounting clientele.


Also, my contract is for 3 years for sure. That's good news.  Approximately when does this end...next November?


I actually talked with the head of the referral program at Ray James a couple months ago, and he acted like it was full steam ahead.  Although I understand he wouldn't exactly disclose to me if they were having issues.  I think the guy that told me they were concerned was a compliance person...and you know how those types are...thank goodness most firms aren't ran by compliance departments.


Our state requires series even Cpa's and attorney's to pass the 65 to share and that would be the plan.  That's different than our state, but I'd be happier if they did...I think they'd send referrals more consistently if they had to pass a test to do so.


I am planning on taking the CFP before too long, and I ordered the book, esp since I read the Nick Murray testimonial, who is one of my favorites.    Good for you.  It's an excellent credential for this industry despite what some of the "have-nots" may try to tell you.


Thanks so much for taking the time to help a newbie.  You're welcome.  Good luck and keep us posted...