Payout for independent brokers

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Jul 28, 2006 4:38 pm

I'm curios- I know that the payout for independent firms is substantially higher than for a bank/wirehouse broker, which tops out around 42%.


After covering all the costs that an independent FA incurrs (assistant, office, licensing, ticket charges, etc) what would you estimate is the net payout? Also- does this vary significantly among firms?

Jul 28, 2006 5:10 pm

My Payout from LPL is running at just under 86% including ticket charges.  After covering overhead, my payout is running at about 68%.  Yes, this varies somewhat by firm, and by set-up.  I've heard of nets all the way from 60% to 80%.  My expectation is that once my production gets to goal ($350K), my net will be in the mid 70's.

Jul 28, 2006 6:30 pm

Guys- So 40%ish payout at at wirehouse and 70%ish as an independent.....after overhead...


What is included in overhead?  For sake of  comparison, how do you account for Health Ins. and 401K in these (2) options?  Is there any other benefits that should be considered in that low payout number?


Its a big difference anf I'd be interested in other net/gross discussions on this subject. 


Thanks,


Rugby

Jul 28, 2006 8:57 pm

As an Indy you'll have to include, aside from health insurance and any retirement planning you do for yourself, E&O insurance, b/d fees, the cost of you office space, utilities, equipment, any assistant you might get, phones, computer, internet connection, etc etc etc.


I think I had read somewhere that the average net payout after all of the expenses (including an assistant) is around 60% or so.  But it was VERY variable depending on what your gross payout started at and where in the country you are (City is more expensive than country, for example).


But you're also building equity in your book, which is yours to do whatever you like with should you decide to leave the business, and that's worth a heck of a lot.

Jul 28, 2006 11:28 pm

For the month of June, my pre-tax net was just above 72%.  I'm careful about expenses...a hangover from my EDJ days.

Jul 29, 2006 12:08 pm
FreedomLvr:

As an Indy you'll have to include, aside from health insurance and any retirement planning you do for yourself, E&O insurance, b/d fees, the cost of you office space, utilities, equipment, any assistant you might get, phones, computer, internet connection, etc etc etc.


I think I had read somewhere that the average net payout after all of the expenses (including an assistant) is around 60% or so.  But it was VERY variable depending on what your gross payout started at and where in the country you are (City is more expensive than country, for example).


But you're also building equity in your book, which is yours to do whatever you like with should you decide to leave the business, and that's worth a heck of a lot.



Correct.  Alot of it depends on how much you are making.  For a guy that's only doing 15k GDC/month, 8k in expenses is a ton.  But for 30-40k/month producers, that same 8k is well worth it for the higher payout.


Plus, all of the expenses that you mentioned above are completely tax deductable on your Schedule C (plus, stuff like your car miles and other nice deductable items).  Also, there are plenty of W2 employees that have to pay for their health insurance as well.  I know that when my wife worked, it was cheaper for us to stay on an individual plan with Blue Cross Blue Shield and pay out of pocket (another tax deduction) instead of going through her group plan with the employer (which took out a bi-monthly premium pre-tax on her paycheck, but the premiums were more than our own plan because we're younger and healthy than the average of the group).  End result, you pay alot less taxes than a W2 guy, because your 1040 shows alot less net income than you actually grossed.