Payout rate for fee-based advisors

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Jun 1, 2007 3:10 pm

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...

Jun 1, 2007 4:10 pm
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup? The company charges 1% annual fee of asset value up to 3 mil.



No base salary, all production payout...





Are you still taking ESL classes?

Jun 2, 2007 2:53 am
Oldproducer:
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup??The company charges 1% annual fee of asset value up to 3 mil.



No base salary, all production payout...




Are you still taking ESL classes?


Yes.


Do you know?


Jun 2, 2007 1:26 pm

Don't know what your company pays, looks like an interesting opportunity.


But I am in a position to hire someone like you, and have an idea of what would be fair from my point of view.


This would be SEC registered RIA work, with no broker dealer bs.


So, what are your qualifications, and what do you think would be fair, and I would be happy to give my opinion from my point of view, if that would be helpful.



Jun 3, 2007 7:02 pm
crashcourse:

Don't know what your company pays, looks like an interesting opportunity.


But I am in a position to hire someone like you, and have an idea of what would be fair from my point of view.


This would be SEC registered RIA work, with no broker dealer bs.


So, what are your qualifications, and what do you think would be fair, and I would be happy to give my opinion from my point of view, if that would be helpful.




10+ years of industry experience, can move about 20-30 mil to new firm which is a small boutique firm.


I'm thinking, since stock broker payout rates seem to range between 25% at big firms to 35% at smaller firms, some with base salary, maybe a 40% payout without base salary might be fair.


Your opinion is appreciated.


Jun 3, 2007 9:19 pm
bluestar:
crashcourse:

Don't know what your company pays, looks like an interesting opportunity.


But I am in a position to hire someone like you, and have an idea of what would be fair from my point of view.


This would be SEC registered RIA work, with no broker dealer bs.


So, what are your qualifications, and what do you think would be fair, and I would be happy to give my opinion from my point of view, if that would be helpful.




10+ years of industry experience, can move about 20-30 mil to new firm which is a small boutique firm.


I'm thinking, since stock broker payout rates seem to range between 25% at big firms to 35% at smaller firms, some with base salary, maybe a 40% payout without base salary might be fair.


Your opinion is appreciated.




What will this firm do for you that they deserve 60% of YOUR money?

Jun 4, 2007 12:13 am

Bobby, if you didn't try so hard to be an annoying twit, you might actually be likeable. Here's a little free advice: take an extra moment and actually think about the content, and respond based on your hard won experience. Maybe you could work on the "packaging" of your meaning a little, might even help you grow professionally, you never know. Improved critical thinking would not be a negative outcome of spending ( a lot of ) time on a professional internet forum.


Bluestar, 40% payout without base is too low for you. Bobby is right.


Any negotiation needs to be a win-win, or the negotiated arrangement will not hold, and would likely end up wasting everyone's time.


So I ask you, let's have a little fun, say you are joining my RIA, and I'm taking care of all of the overhead, come back with a more realistic offer for yourself, and draw me out.

Jun 4, 2007 1:53 am

Anyway, Bluestar, I am planning my week and decided not to waste any more time here, so good luck, and I would say 50% with plus an incentive to step through 60% and 70% would be reasonable. Good luck, and good bye all.

Jun 4, 2007 10:47 am

I am planning my week and decided not to waste any more time here


Good, maybe you and Parachute/Fgnancy/Goforbroke et al can take yourself out for a good drunk.

Jun 4, 2007 10:50 am
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...



To give you a real answer. The pay out depends on where you fall in the production grid.  If you produce XX from any sources ,commission  and fees, you get a 70% payout. (the lowest for my firm)  If you produce XXX you get a 90% pay out.  Highest for the firm unless you are an OSJ.

Jun 5, 2007 11:21 am
Dust Bunny:
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...



To give you a real answer. The pay out depends on where you fall in the production grid.  If you produce XX from any sources ,commission  and fees, you get a 70% payout. (the lowest for my firm)  If you produce XXX you get a 90% pay out.  Highest for the firm unless you are an OSJ.



90% payout???!!!  You're not playing a joke on me, are you??  I don't want to be kicked out of the interviewer's office....


Jun 5, 2007 11:23 am
crashcourse:

Anyway, Bluestar, I am planning my week and decided not to waste any more time here, so good luck, and I would say 50% with plus an incentive to step through 60% and 70% would be reasonable. Good luck, and good bye all.


Thanks for your input.

Jun 5, 2007 11:56 am
bluestar:
Dust Bunny:
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...



To give you a real answer. The pay out depends on where you fall in the production grid.  If you produce XX from any sources ,commission  and fees, you get a 70% payout. (the lowest for my firm)  If you produce XXX you get a 90% pay out.  Highest for the firm unless you are an OSJ.



90% payout???!!!  You're not playing a joke on me, are you??  I don't want to be kicked out of the interviewer's office....




Well,.... obviously you don't want to go in demanding 90%. That's would only  be for proven big producers.  If you have commission statements to show previous production you may be able to use that as a leveraging tool for you initial payout, but expect to be put at the lowest level until you prove your production.   Until the company sees that you are actually producing at whatever their grid level is they are going to low ball you.  You might ask what the grid looks like, how much production do you need to have and for how long before you are re allocated on the payout grid.


At least that's the way it works in the firm I'm affiliated with. 


When I went indy several years ago, I was at 70% and in 8 months or so was bumped to 80%.  I might have been started at 70% (which is a bit high)  because of my previous track record, so possibly you could be looking at something lower.


It really all depends   It depends on how much the company is providing for you in services and support on how much they will take from the total fees and commissions.  If they are providing equipment, paying your E&O etc then they will take more. 


So out of my 80% I pay for everything.  Platform/affiliation fees, E&O, extra research sources not provided in the platform, Rent on my office, advertising costs, postage, utilities, my own equipment, continuing education and so on. 


Before you go Indy you need to have some idea of what your expenses you are responsible for, how much they will be, what payout grid you are going to be on and do a number crunch to see if you can live on that.   Just like any business, when you are in an independent shop......it means just that.....independent. 

Jun 5, 2007 4:12 pm
Dust Bunny:
bluestar:
Dust Bunny:
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...



To give you a real answer. The pay out depends on where you fall in the production grid.  If you produce XX from any sources ,commission  and fees, you get a 70% payout. (the lowest for my firm)  If you produce XXX you get a 90% pay out.  Highest for the firm unless you are an OSJ.



90% payout???!!!  You're not playing a joke on me, are you??  I don't want to be kicked out of the interviewer's office....




Well,.... obviously you don't want to go in demanding 90%. That's would only  be for proven big producers.  If you have commission statements to show previous production you may be able to use that as a leveraging tool for you initial payout, but expect to be put at the lowest level until you prove your production.   Until the company sees that you are actually producing at whatever their grid level is they are going to low ball you.  You might ask what the grid looks like, how much production do you need to have and for how long before you are re allocated on the payout grid.


At least that's the way it works in the firm I'm affiliated with. 


When I went indy several years ago, I was at 70% and in 8 months or so was bumped to 80%.  I might have been started at 70% (which is a bit high)  because of my previous track record, so possibly you could be looking at something lower.


It really all depends   It depends on how much the company is providing for you in services and support on how much they will take from the total fees and commissions.  If they are providing equipment, paying your E&O etc then they will take more. 


So out of my 80% I pay for everything.  Platform/affiliation fees, E&O, extra research sources not provided in the platform, Rent on my office, advertising costs, postage, utilities, my own equipment, continuing education and so on. 


Before you go Indy you need to have some idea of what your expenses you are responsible for, how much they will be, what payout grid you are going to be on and do a number crunch to see if you can live on that.   Just like any business, when you are in an independent shop......it means just that.....independent. 



The firm I'm considering moving to is SEC registered RIA firm.  Our discussion hasn't advanced to all the agreement details yet, just the understanding that the company will provide all the SERVICE support, from office to equipment to report generating.  I'm on my own with  managing my clients assets, servicing my own clients, and developing new clients.


I estimate I can move about $20-30 mil over, so I'm that much "proven".


Does these info change anything???


I'm glad two people both put it around 70%, and I hope I end up getting at least that....  but to be honest that still seems very high to me...  I'd need a big confidence boost to ask for that.

Jun 5, 2007 5:25 pm
bluestar:

Anyone has any idea about the prevailing payout rate for independently practicing advisors in an fee-based setup?  The company charges 1% annual fee of asset value up to 3 mil.


No base salary, all production payout...



Wow, Looney,that was embarassing.


Bluestar, let's say your RIA is billing 1% and you move 20 million. 30% to the RIA, or $60,000, would make it worthwhile for someone like me to essentially take on a " room mate", covering all of the expenses.


E& O might be a wild card, but that should be a fixed cost covered by higher production. How fancy is the office, does the firm do any marketing/postioning that would bring new business to your book?


Why do you need or want to join a firm, if you already know the business,  the 30% to RIA partner could cover your fixed costs?


Partnerships are hard, and the higher your payout, the more it looks like a marriage. The lower your payout, the less stability for you.


Just some thoughts.

Jun 5, 2007 5:25 pm
bluestar:

I'm glad two people both put it around 70%, and I
hope I end up getting at least that....  but to be honest that
still seems very high to me...  I'd need a big confidence
boost to ask for that.





You can always ask for less.



A typical RIA expects at least an 80% net payout on client fee's, since the platform costs tend to run about 20bp or so.

Jun 5, 2007 5:28 pm

Allreit, how are you defining plaform costs?

Jun 5, 2007 11:34 pm
razeurgame:

Allreit, how are you defining plaform costs?





Custody, compliance etc etc. Same as if you were at LPL



Indy's and RIA's are going to have roughly the same cost structure and payout, if a little bit lower on the RIA side.

Jun 6, 2007 12:20 am

I don't get it. An Indy at LPL might have a 91% payout, but there is an admin fee on that takes the payout lower on wrap accounts. RIA payout is 100%. There might be 12b1 fees on managed funds at LPL that bring you closer to 100%. The other fixed costs would be similar at both platforms, what am I missing here?

Jun 6, 2007 1:01 am
razeurgame:

I don't get it. An Indy at LPL might have a 91% payout, but there is an admin fee on that takes the payout lower on wrap accounts. RIA payout is 100%. There might be 12b1 fees on managed funds at LPL that bring you closer to 100%. The other fixed costs would be similar at both platforms, what am I missing here?



An RIA is going to have slightly higher compliance costs because they will have to create their own procedures manual and implement it, or purchase said services from an outside vendor.  I would imagine, too, that there is more administrative time involved, too.  LPL's and similar indy b/d's that allow you to operate under their corporate RIA also do much of your recordkeeping/data storage/performance reporting for you.  As your own RIA you have to arrange to do this yourself.

Then there's also the issue that you need to either forgo comission business or affiliate separately with a b/d and/or insurance carriers.  Most b/d's in that case will want some ongoing info about your RIA business and may also charge you slightly more for E&O.

Economies of scale as you grow larger probably give the standalone RIA a bigger advantage.  Then again as your practice grows the payout at LPL(and I presume other indy b/d's) grows.

Probably you make a little more as an RIA if you want to do the extra work.  For me, it was attractive to get most of my technology in one convenient bundle and yet still have quite a bit of freedom to run my business the way I see fit.  That was worth giving up a modest amount of incremental income.