Recruiting for your own branch

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Jul 6, 2007 2:17 pm

Am thinking of growing a branch of one. Will pay salary plus bonus.


Has anyone developed any tricks to get some good applicants? It would be nice to get some trainee blowout with five or ten million to bring over, but I don't want them burned out on the career.


Was thinking to call new Jones reps and the wirehouses - anyone see an ethical problem with me just calling them up at work? ( I usta be a medical recruiter, so I know how to do it.)


Jul 6, 2007 2:28 pm

A lot of the senior advisors at the wirehouses are always getting called at their office...plenty of free meals out there for them.  I've always seen the manager's (you) job as the same as a regular rep in that its a contact game.  The more brokers you call, the more appointments you'll set.  In our office, our experience is word of mouth.  Maybe talk to some mutual fund wholesalers, they seem to know a lot of brokers and could help you find out about what's going on at other firms. 

Jul 6, 2007 2:32 pm

You don't want to call the NEW Jones reps.  If you really want to target a Jones rep, call him when he's been out about 2.5 years.  He might have that $10 Mil, but he's not making a bunch of money yet.  That's when Jones loses the most of the brokers. 


Heck, if the salary is big enough you can call me.   

Jul 6, 2007 5:14 pm

Great, Spaceman, I'll have those Omaha steaks delivered to your door this evening after dark.


That's about what I was thinking - around 8m AUM.


This would be an employee arrangement with salary, and I was thinking of paying a very generous bonus, based on new business that I can help close ( with my experience, CFP, planning resources).


Generally ( not NYC, Chicago, LA and so on - how much income do you think a 2.5 year candidate would expect or need to bring home, and how burned out might this person be on prospecting - how much do you think they might be expected to bring in as new money for a couple more years, without working too hard?


Thanks!

Jul 6, 2007 5:15 pm
wallstreeter:

A lot of the senior advisors at the wirehouses are always getting called at their office...plenty of free meals out there for them.  I've always seen the manager's (you) job as the same as a regular rep in that its a contact game.  The more brokers you call, the more appointments you'll set.  In our office, our experience is word of mouth.  Maybe talk to some mutual fund wholesalers, they seem to know a lot of brokers and could help you find out about what's going on at other firms. 



Exactly the mentality I am thinking is required. Thanks for validation and tips.

Jul 6, 2007 5:22 pm

3k gross salary + 40% payout 1st year....1500 Gross Salary + 45% 2nd year, and 50% payout, no salary starting 3rd year. This is from an ex Jones who is building his practice. He just hired a newby, no experience with this payout.

Jul 9, 2007 12:25 am

JUST PUT UP A BILLBOARD WITH A CHICK IN A BIKINI.

Jul 9, 2007 12:28 am
Spaceman Spiff:

You don't want to call the NEW Jones reps.  If you really want to target a Jones rep, call him when he's been out about 2.5 years.  He might have that $10 Mil, but he's not making a bunch of money yet.  That's when Jones loses the most of the brokers. 


Heck, if the salary is big enough you can call me.   



Duly noted sir!

Jul 9, 2007 1:10 am
bspears:

3k gross salary + 40% payout 1st year....1500 Gross Salary + 45% 2nd year, and 50% payout, no salary starting 3rd year. This is from an ex Jones who is building his practice. He just hired a newby, no experience with this payout.


Great, help me out here, if he brings over seven or eight million, and I pay 3k plus 40%, that pretty much gives him everything the book is generating. But he is an employee, so it is not his book.


With new business and increasing trails, he's happy with 50%.


I think that would be pretty solid, thanks for the perspective and if anyone else has any thoughts, please say.


I am absolutely pumped about recruiting.


Jul 9, 2007 1:11 am
FreeLunch:

JUST PUT UP A BILLBOARD WITH A CHICK IN A BIKINI.


There has to be some way to take this idea down to my business. This is about trying to have them jump into the boat.

Jul 9, 2007 10:32 am

I'm in the process of trying to gain an associate so I can transition into a retirement mode in the next 8 to 10 years. So I have been thinking about this a lot.


Why would the new guy want to be your employee? and why would you want to be an employer?  There are significant tax advantages to being an independent contractor for your new guy and being an employer is a pain and costly. (Trust me, I've been there). You have a lot of extra taxes that YOU have to pay out and the reporting/bookkeeping /payroll is a lot of work.


I would think that an arrangement where you take an override on his production with a contract/agreement for his additionally sharing costs of running the office, advertising, equipment etc.  The contract could specify a certain pay out and increases as gross increases without being an empoyer/employee relationship.


I would contact a CPA and attorney to discuss what business model might be best for you if you add another person. Legality and tax ramifications.   S Corp, LLC, LLP .  When I do find an associate, and I admit I haven't looked too hard just yet, I will be contacting my attorney about this and also setting up a business succession plan.

Jul 9, 2007 10:44 am

If you're looking at Jones brokers in the 2.5 year range bspears is probably right on target.  (urp!!...I think I just threw up in my mouth a little bit after saying spears is right!).


If he's not making the money he needs at Jones, the guarantee of say $40,000 a year plus bonuses probably sounds pretty good.  If all he wants is to be in the biz, not really worrying to much about the $$ right now, he might jump. 


With that said, it would be a short sighted FA who jumps for a guaranteed salary plus bonuses if he forfeits his ability to grow his own book.  Nothing like working hard to build something for someone else and having to start over if he wants to break out on his own someday.  It's not like jumping from your current b/d to another hoping to take as much as possible.   


I would personally have to have some sort of agreement on taking clients when/if I decided to part ways.  I might feel trapped if I can't take a book of some kind with me.  I don't know how it would work, but I wouldn't like the idea of having nothing to call my own.  That's the main reason I don't like the team environment.  If I work like a broker, talk like a broker, and act like a broker, I want to be treated like a broker.  I don't want to build something for someone else.  Even at Jones, if I were to, gulp, leave the comfort of the mother ship, I can take whatever will follow.     


I might be willing to work for Joe if he pays me $150K/year plus bonuses for AUM brought in, pays my annual dues at Bellerive CC, and sends me on two great vacations a year.  Hey, if I'm going to work for "the man" he'd better be willing to pay me what I'm worth! 

Jul 9, 2007 11:00 am
Spaceman Spiff:

If you're looking at Jones brokers in the 2.5 year range bspears is probably right on target.  (urp!!...I think I just threw up in my mouth a little bit after saying spears is right!).


If he's not making the money he needs at Jones, the guarantee of say $40,000 a year plus bonuses probably sounds pretty good.  If all he wants is to be in the biz, not really worrying to much about the $$ right now, he might jump. 


With that said, it would be a short sighted FA who jumps for a guaranteed salary plus bonuses if he forfeits his ability to grow his own book.  Nothing like working hard to build something for someone else and having to start over if he wants to break out on his own someday.  It's not like jumping from your current b/d to another hoping to take as much as possible.   


I would personally have to have some sort of agreement on taking clients when/if I decided to part ways.  I might feel trapped if I can't take a book of some kind with me.  I don't know how it would work, but I wouldn't like the idea of having nothing to call my own.  That's the main reason I don't like the team environment.  If I work like a broker, talk like a broker, and act like a broker, I want to be treated like a broker.  I don't want to build something for someone else.  Even at Jones, if I were to, gulp, leave the comfort of the mother ship, I can take whatever will follow.     


I might be willing to work for Joe if he pays me $150K/year plus bonuses for AUM brought in, pays my annual dues at Bellerive CC, and sends me on two great vacations a year.  Hey, if I'm going to work for "the man" he'd better be willing to pay me what I'm worth! 





You Jonesies like to dream BIG don't ya!  Let me just run some numbers on that deal and I'll get back to you in a few years.....

Jul 9, 2007 1:18 pm
Dust Bunny:

I'm in the process of trying to gain an associate so I can transition into a retirement mode in the next 8 to 10 years. So I have been thinking about this a lot.


Why would the new guy want to be your employee? and why would you want to be an employer?  There are significant tax advantages to being an independent contractor for your new guy and being an employer is a pain and costly. (Trust me, I've been there). You have a lot of extra taxes that YOU have to pay out and the reporting/bookkeeping /payroll is a lot of work.


I would think that an arrangement where you take an override on his production with a contract/agreement for his additionally sharing costs of running the office, advertising, equipment etc.  The contract could specify a certain pay out and increases as gross increases without being an empoyer/employee relationship.


I would contact a CPA and attorney to discuss what business model might be best for you if you add another person. Legality and tax ramifications.   S Corp, LLC, LLP .  When I do find an associate, and I admit I haven't looked too hard just yet, I will be contacting my attorney about this and also setting up a business succession plan.



Thanks, I do have both options, employee or independent contractor.


As far a legality and taxes, the broker dealer has a clearly defined set of options - you're right, one of the big advantages of having your own gig ( from the hire's point of view ) would be Schedule C - not sure too many " situation seekers " would even fully appreciate that point.


My thinking is, I'm taking some one who wants to be in the business, but did not quite make it at the training b/d. They have clients and assets, and need a place to hang their license, fast.


New hire gets a salary plus bonus, as straight commissions are not allowed by the b/d for compensation, although bonus can be tied to things like increases in profitability to the business, based on that rep's tranch of businesss.


In year one, it looks like it would be nearly break even for me, as GDC increases and you break out over fixed costs, cash flow increases.


Of course, I own the book of business, but new hire gets to service their own clients as an employee. There is a non compete to protect my book.


As the model becomes turnkey, the potential for growth, say over five years, the business can double.


Since the office costs are basically fixed, no reason to share them - I'm not looking for a partner, and I want my hire to be able to service my current clients when I am gone. Also need some enthusiastic prospecting, but not to the point where new rep burns out.


They get: salary, bonus, case work on larger existing cases, CFP sponsorship, all overhead paid, less pressure, and they get to learn from me. A " job " - just show up and make a good effort, and lots of flexibility in hours worked to help stay motivated.

Jul 9, 2007 1:26 pm
Spaceman Spiff:

If you're looking at Jones brokers in the 2.5 year range bspears is probably right on target.  (urp!!...I think I just threw up in my mouth a little bit after saying spears is right!).


If he's not making the money he needs at Jones, the guarantee of say $40,000 a year plus bonuses probably sounds pretty good.  If all he wants is to be in the biz, not really worrying to much about the $$ right now, he might jump. 


With that said, it would be a short sighted FA who jumps for a guaranteed salary plus bonuses if he forfeits his ability to grow his own book.  Nothing like working hard to build something for someone else and having to start over if he wants to break out on his own someday.  It's not like jumping from your current b/d to another hoping to take as much as possible.   


I would personally have to have some sort of agreement on taking clients when/if I decided to part ways.  I might feel trapped if I can't take a book of some kind with me.  I don't know how it would work, but I wouldn't like the idea of having nothing to call my own.  That's the main reason I don't like the team environment.  If I work like a broker, talk like a broker, and act like a broker, I want to be treated like a broker.  I don't want to build something for someone else.  Even at Jones, if I were to, gulp, leave the comfort of the mother ship, I can take whatever will follow.     


I might be willing to work for Joe if he pays me $150K/year plus bonuses for AUM brought in, pays my annual dues at Bellerive CC, and sends me on two great vacations a year.  Hey, if I'm going to work for "the man" he'd better be willing to pay me what I'm worth! 



You bring up a good point. A watershed decision, self employment vs. employee.


In the past, I have interviewed candidates leaving the independent contractor environment, and this is the biggest problem with finding someone: unrealistic expectations.


They want to have their own business, but did not succeed at the training broker dealer. Candidates have said, " I want my own book and clients, and a salary, and to be left alone, and someone to send me new clients, and a window office, and ... "


I figure it will take me four months to find the right person.


Thanks for validating bspears perspective. Big help.

Jul 9, 2007 2:02 pm

I think for the right person it might be a great fit to be the employee of a good producer.  No real pressure to produce on my own, just taking the load of book management so the big guy can just think about making rain. 


A buddy of mine left Jones to go indy with a top producer.  The basic setup is my buddy runs the office day to day and the big guy goes around the country bringing in multi million $ clients.  My buddy is free to build his own book while he's there, but the big carrot for him is that the big producer is going to retire someday.  Not a bad deal to do the grunt work for a few years while waiting to inherit a $300 mil book.


Good luck with your search.  


Jul 9, 2007 2:12 pm

I got a little teary eyed when I read your comments...Thanks Spiffy...your just swell!!

Jul 9, 2007 2:51 pm
Spaceman Spiff:

I think for the right person it might be a great fit to be the employee of a good producer.  No real pressure to produce on my own, just taking the load of book management so the big guy can just think about making rain. 


A buddy of mine left Jones to go indy with a top producer.  The basic setup is my buddy runs the office day to day and the big guy goes around the country bringing in multi million $ clients.  My buddy is free to build his own book while he's there, but the big carrot for him is that the big producer is going to retire someday.  Not a bad deal to do the grunt work for a few years while waiting to inherit a $300 mil book.


Good luck with your search.  




Thanks. It is all about having a good fit, it is about good people with good values working over a long period. I always look a prospect in the eye and say, " best case, we're working together for twenty or more years, who you work with, you want to get it right."


I don't think you would just inherit the book, though. :).

Jul 9, 2007 3:08 pm

spears and spiff are close on the 2.5 years off, I would look a few months further out because after 3 years the obligation to repay training expenses goes away.  Also, after 3 years, you are really at the weak spot on the EDJ pay scale.  You don't need the home office subsidizing you anymore, you make enough to cover rent and your assistant.  You also feel pretty good about the training, more always helps but if you have been paying attention you have the tools to get you success for the next several years.


But you still have your marketing and toilet paper expenses.  And I think the health care subsidy drops off around that time, so your expenses just shot up.   And you are probably producing 12-15,000 GDC trying to pay for all of this (38% back to you, pre expenses).  Your bonus is nonexistent, and you aren't qualifying for trips yet, at least consistently.  This is also not where you envisioned yourself 3 years ago when you started this career. 


My experience was quite a few dissatisfied people at this stage, also this is where EDJ is really losing people, at least they were a year or 2 ago.  (They probably lose more earlier on, but in terms of people they would like to stay, Segment 3 is where alot of their up and comers were cashing out).

Jul 9, 2007 4:04 pm

Ex EDJ4, thanks so much.


Just thinking aloud: I remember being at that point in my career. You get really burned out on the marketing.


There is a ton of business in my book that an Associate could find - to supplement servicing his own clients. I think I would mainly take on the rainmaking job - for me that is more fun at this point, again.


Of course, I have the whole broker world to recruit from, not just EdJ. I do admire the training record of that firm. I visited their hq at the invitation of a recruiter some time ago.


What % of book do you think the average transferring EdJ rep could bring over? Other than the training cost obligation, do these reps have significant non compete contracts?