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Sep 9, 2005 7:59 am

Vets,


I need your honest opinion. I've been in the biz for 3 years now. I have about 17 mill AUM. 50% of that is fee based paying 1%- 1.5%. Changed firms once which cost me about 6 months or better worth of production. Biz has slowed down a good bit and I'm starting to have second thoughts about this biz.


Am I on track, or falling behind?


Sep 9, 2005 8:40 am

Regardless of the opinions of others, why don't you ask yourself some basic questions, like:



Do you enjoy what you do now more or equally another potetial job?



What is the autonomy you enjoy now worth?



How much are you taking home now, and is that income easily replaceable?



There are many other questions you could ask yourself, but I think
whether or not you've hit a magic number isn't all that relevent as
long as your job isn't on the line and your happy.



Ahead of the curve, behind the curve, whatever.  It doesn't matter
in my opinion.  What matters is are you doing the right things
now, enjoying what you're doing, etc

Sep 9, 2005 8:53 am
ezmoney:

Vets,


I need your honest opinion. I've been in the biz for 3 years now. I have about 17 mill AUM. 50% of that is fee based paying 1%- 1.5%. Changed firms once which cost me about 6 months or better worth of production. Biz has slowed down a good bit and I'm starting to have second thoughts about this biz.


Am I on track, or falling behind?




Is business slow or have you slowed down? What's your payout?

Sep 9, 2005 8:56 am

Biz has slowed, maybe I've also slowed down. payout 31%. I work for a large bank

Sep 9, 2005 9:06 am

I figure going into 2006 I have worst case scenario about 50k net in fees I can depend on. About half of what my peers in other industries are making.

Sep 9, 2005 9:15 am

EZ, everyone throughout their career hits moments like yours when it seems like nothing is working & maybe there's some feeling of burnout.  And those moments can be more disturbing for someone newer like you. 


Try taking a look at how you're doing your business. What worked successfully in the past?  Are you still doing these things? What are you doing now that doesn't seem to be working?  Are you repeatedly doing the things that don't work?  (isn't there some definition of insanity being doing the same things over & over again expecting a different outcome?)  Look at your book and the client segments.  Are there types of clients (executives, widows, self-employed, certain types of professions, roll-overs, etc.) that you like working with better than others?  Perhaps try giving focus to those segments (market niches) and better develop them.  Do you have a business plan?  If not, develop one, ask your management & successful associates to critique it, and then stick to it.


Also, seek out some of the positive & motivated successful reps in your office/firm and talk with them over a drink to seek their advice.


You're still in a building stage & even if you're doing things right it may not be until year 5 until really established.  It sounds like you may just need a change in direction and approach -- something to bring some energy and freshness to what you're doing. 


Having said all this, as someone else essentially said -- if you really don't feel this is an enjoyable, rewarding profession, then maybe it is time to consider other options.

Sep 9, 2005 9:25 am

Thanks. My feelings about the biz are this: when I'm gathering assets I like it. When the money stops flowing I hate it. I don't even care about the gross I make monthly because of my fee based goals. I love the autonomy, not too crazy about the amount of money I'm making for my family. Not too crazy about the lack of power and money I don't have as compared to the managers above me. I wonder sometimes why can't I be that manager making 250k+?

Sep 9, 2005 9:28 am
ezmoney:

Biz has slowed, maybe I've also slowed down. payout 31%. I work for a large bank



Ouch! Have you considered changing firms where you get to keep more of YOUR money? I was like you and I changed from a 46% payout to a 90% payout. You will find that getting to keep your own money is very energizing and  you will be more motivated to do business. I was doing 20-30,000 a month at that time and it broke my spirit to see that I was paying the firm $15,000 per month for a desk, phone and business cards.

Sep 9, 2005 9:42 am

Can't do it now. I'm on a grid. The more I gross the more payout I get. My wife doesn't work and I dont have the AUM to go indy. I'm stuck for now. It sounds to me that you had quite a bit AUM when you went indy and not 17 mill.

Sep 9, 2005 9:58 am
ezmoney:

Can't do it now. I'm on a grid. The more I gross the more payout I get. My wife doesn't work and I dont have the AUM to go indy. I'm stuck for now. It sounds to me that you had quite a bit AUM when you went indy and not 17 mill.


You have plenty of AUM to go indy. You have to overcome some fear to make the move. You've got everything else. Good luck.

Sep 9, 2005 1:06 pm
ESABATM:
ezmoney:

Can't do it now. I'm on a grid. The more I gross the more payout I get. My wife doesn't work and I dont have the AUM to go indy. I'm stuck for now. It sounds to me that you had quite a bit AUM when you went indy and not 17 mill.


You have plenty of AUM to go indy. You have to overcome some fear to make the move. You've got everything else. Good luck.



$17M is enough to go indy? With a ROA of 1% (IMO rather high) that's $175k in production. After all overhead, at that payout (what would it be at $175k?) what's your gross income?


I have to say I think 17M seems pretty low to go indy, but others might know better.

Sep 9, 2005 1:55 pm

It's way low in my opinion.  You'd better have a plan to retain/generate at least $25 million AUM in the first 6 months, which means that you'd better have at least $30 million AUM and strong relationships with you clients before you go.  That, in my part of the world, is the bare minimum.

Sep 9, 2005 2:15 pm

I would say that it would depend on how much income you need vs how much income you want. Or as they say in the online game I play  Need vs. Greed.  Also epends on how much your overhead is.  Each of us Indys are different. Some like myself are in a low cost area and don't have a full time employee so my over head is very very low. Even though he has 17M now when he moves I wouldn't expect that he would retain more than 40% of those assets at best, since he is at a bank.  Bank customers nortoriously stay put when the rep moves.


However, at most indy firms if you are bringing in gross commissions of 100K to 150K you are usually at a 80% pay out grid. Insurance commissions on non variable products , like fixed and EI annuities, are set by the companies you contract with or the GA you are working with.  Your pay out there is 100%


Crunch the numbers for yourself

Sep 9, 2005 2:31 pm
babbling looney:

I would say that it would depend on how much income you need vs how much income you want. Or as they say in the online game I play  Need vs. Greed.  Also epends on how much your overhead is.  Each of us Indys are different. Some like myself are in a low cost area and don't have a full time employee so my over head is very very low. Even though he has 17M now when he moves I wouldn't expect that he would retain more than 40% of those assets at best, since he is at a bank.  Bank customers nortoriously stay put when the rep moves.


However, at most indy firms if you are bringing in gross commissions of 100K to 150K you are usually at a 80% pay out grid. Insurance commissions on non variable products , like fixed and EI annuities, are set by the companies you contract with or the GA you are working with.  Your pay out there is 100%


Crunch the numbers for yourself



Thanks for the great info, but would you help me with the cruching part?


If he does $150k in production @ 80% he's cleared $120k. That's not after ticket charges, technology fees, reasonable overhead costs, etc, is it? Let's say he has a small but reasonable 1 man office with what, $1k a month to phones, rent, etc.. I know there's a lot of fudge factor there and costs around the country really vary.


What's it really fair to say he's taking home?

Sep 9, 2005 2:54 pm

Ez $$$,


I feel your pain brother. I too have been in the biz 3 1/2 yrs. I wonder, sometimes if this is the best fit for me. Of course, I love opening accounts and helping people, and enjoy researching investments - and hate the down times. I don't pay any attention to commissions, as everything I do is annuitized. I got into the biz, first and foremost because I thought I could make a LOT of money. I have not made much yet.  I guess the thing that keeps me going is, I see the potential, I analyze the need vs. want that Babbling mentioned. I know that if I can just get to a level of production that provides me with $80,000 per year (the need), I can build from there to what I "want" I keep reminding myself that I don't need $250,000 a year right now (Just because it seems like everyone in the world makes that much, besides me).


No matter how many times I have almost let the rope go, I don't know what I would do, which offers the rewards that this career does. Sure, I could go become a pharma rep, and make twice what I make now, but I don't want to do that for a living, and I have doubts about the future of that position. There are a lot of obstacles in our way. 


I think, in the past, I have given up on things too soon, and I don't want to make that mistake with this opportunity. Man it's hard though. People you talk to in the outside world have no idea. That is why there are forums like this one. Force yourself to look back, when you only had 5 million under mngmt!! You have progressed!! There are 20 guys for every one of you who would have quit by now!!! Those guys who make $250,000 stuck it out (and some were hired into management by their . There has NEVER been an easy time to start in this business.


You know what, 3 years from now, you will probably have 25-30 million under mngmt, making $80,000 +.    

Sep 9, 2005 9:10 pm

Let me say it again..."17m is plenty to go indy."


I only do VA and EIA business. My only ticket charges are from liquidating accounts to put the money in annuities. Usually, I eat the charges because I'm making so much anyway. If not, I'll charge 10 or 20 bucks for the trade. I don't want the old broker liquidating and hammering them with commissions.


My payout is 90% on VA's and 100% on EIA's. I have a feeling I'm making more money than bank brokers who do what I do.

Sep 12, 2005 1:32 pm
ESABATM:

Let me say it again..."17m is plenty to go indy."


I only do VA and EIA business. 



OK, 17M is enough to go indy to sell insurance products. Makes sense.

Sep 12, 2005 2:22 pm

MSdog--I'm with you; seems like 1% rev/AUM is high (I like .8% for planning purposes).  BUT...with a low-overhead, bare bones setup (no employee, no big extras) that still allows you to get things done, I think it'd be hard to spend more than 2-3k/mo in most of the country (non-coasts).  Even w/the lower ratio (.8%), 17m might still make it:


17m x .8% = 136k, minus 24-36k annual expenses = 100-112k before taxes etc (which you have to eat no matter where you are).  At 10m, you're looking at 56-64k; at 15m 84-96k.  I think a high quality group of clients (w/referral potential especially) that adds up to 15m could make it feasible.


It seems to me that the main benefit to going indy w/a lower AUM is that you keep more as you grow the top line.  That's obvious, but what I mean is that those 3 years (for example) you are indy may yield you an extra 20-50k/yr net if you can pull it off.  Cumulatively,  you're talking real money.  The tradeoff is that you better have a lower NEED #.  Some people that had 100k net as a WANT # when they started turn than into a NEED # pretty quickly after achieving it.  My goal is to always keep my NEED # growing a lot slower than my REAL # even when the REAL # gets close to the WANT #.


That's about all I have to say about that.


Sep 12, 2005 5:08 pm

Thanks for the great info, but would you help me with the cruching part?


If he does $150k in production @ 80% he's cleared $120k. That's not after ticket charges, technology fees, reasonable overhead costs, etc, is it? Let's say he has a small but reasonable 1 man office with what, $1k a month to phones, rent, etc.. I know there's a lot of fudge factor there and costs around the country really vary.


What's it really fair to say he's taking home?


That would be hard to say because it depends on a lot of factors.  What product mix (mutual funds, stocks, bonds, annuities). What asset turn over. Some products such as annuties pay a higher comission and then don't turn for years. How much new money is coming in on a monthly basis? 401K and Simple IRAs are great to annuitize the business.  100 clients investing 100.00 a month into mutual funds?  Thats 10K at an average return of 3% so $3,000 a month would certainly cover overhead for the small one person office. How much insurance business (that pays out at 100%) are you going to do?  That 50,000 MoneyGuard UL policy pays out at 7% $3500.


The return on AUM could be much higher than the .8% Cowboy presented, but to be on the safe side we should plan for the least and hope for the best. As a ballpark I would guess that his net net is probably closer to 60-65%.  And with a good creative taxman, it could be higher. Still much better than the original payout at his other firm.


Granted I'm in a small area and don't have employees, but my monthly fixed overhead including advertising and newsletters is a little less that $1000.  17M in AUM is easily enough to support that and bring a tidy income.  Of course my NEED$$ is not huge

Sep 12, 2005 6:03 pm

EZ--if I were you, I'd change my screen name/handle based on your current dilemma, perhaps to something like "Hard Money And Very Little of It."  Your dilemma seems to be the industry norm:  no good way to build a fee-based business and still eat, much less feed a family.  And when it does work, the still somewhat modest income can create an inferiority complex, as it may be for you.  But if you do right by your clients, you do have "equity" in your relationships w/them.  That's what kept me going...


Only way I can see to do fee-based from scratch is to build a transaction/A share business quickly for a few years, get a nice bonus (based on transactional production) to move, then use the cash as a means to supplement living while building fee-based stuff.