Advice for Building Book with an eye to going Indy

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Nov 29, 2009 5:31 pm




Hello All



I have been reading the forums for a few months now and appreciate the good information here.



I re-hired at my old wirehouse and am starting over from scratch.



I can already see things are quite a bit different. Perhaps it is because of the down market, but I can see the writing on the wall already. There is lots of turmoil with the established brokers re expense reductions, staff cuts of sales assistants, reduced payouts, management in upheaval, closing of offices...



If you seasoned guys were starting over, is there any particular advice you would give to make the transition to an independent B/D easier. For example, avoid proprietary PMAs, instead look at quality C share funds?



And by easier- I mean easier to transfer assets over and retain clients. The push as I see it from the firm is to sell firm discretionary wrap accounts/PMAs, where the sell is really the strength of the firms money mangers.



That said, it appears we are free to form our business along any reasonable track, as long as it works- i.e is fair to the client and meets the firms production and AUM goals for us.



Any thoughts?



Nov 29, 2009 9:54 pm

um.... how much experience do you have?

 
I went RIA after UBS and have had no issues transfering over even structured products issued by UBS.  No issues with products... just focus on the service.
Nov 29, 2009 10:52 pm




Maks



Thank you for your reply. I was two years in production before and am just back in production again after a 7 year break. The relevance of this is, I suppose, that I was successful before gathering assets and selling- my main methods were cold calling- tons of it, and networking. Had 13 mil AUM after 2 years, left to take a job with a private fund, which I enjoyed until this year when we shut down - looked at opportunities and ended up back at my old firm.



This second time around I am looking at things a bit differently, and note the greater acceptance/need/viability of the fee for advice model.



Was it a big change in attitude and prospecting for you going from UBS to RIA? Did you consider going the independent, clearing thru a B/D model? I am curious what drove your decision?



This second go around it seems like the firm wants us to team up within a reasonable period of time- but I am already questioning the business model now of the wirehouse, both for the client and the payout.



May be wrong here but 300K production with a payout of 34% grosses me $102K, the same 300K at ...say 70% clearing thru a B/D with office expense expenses puts me at about 220K.



I am less familiar with the fee model. For example, if one had a book of say the 30 mil AUM doing 300K production for example, how does one transition that book into a fee business? I suppose simply tell your clients your services are now available for a 1% annual fee?



Please excuse me if I am off base here, but primarily looking at options for long term thinking and planning.



I thank you in advance for your reply.

Nov 29, 2009 11:00 pm
breakline:



Maks

Thank you for your reply. I was two years in production before and am just back in production again after a 7 year break. The relevance of this is, I suppose, that I was successful before gathering assets and selling- my main methods were cold calling- tons of it, and networking. Had 13 mil AUM after 2 years, left to take a job with a private fund, which I enjoyed until this year when we shut down - looked at opportunities and ended up back at my old firm.

This second time around I am looking at things a bit differently, and note the greater acceptance/need/viability of the fee for advice model.

Was it a big change in attitude and prospecting for you going from UBS to RIA? Did you consider going the independent, clearing thru a B/D model? I am curious what drove your decision?

This second go around it seems like the firm wants us to team up within a reasonable period of time- but I am already questioning the business model now of the wirehouse, both for the client and the payout.

May be wrong here but 300K production with a payout of 34% grosses me $102K, the same 300K at ...say 70% clearing thru a B/D with office expense expenses puts me at about 220K.

I am less familiar with the fee model. For example, if one had a book of say the 30 mil AUM doing 300K production for example, how does one transition that book into a fee business? I suppose simply tell your clients your services are now available for a 1% annual fee?

Please excuse me if I am off base here, but primarily looking at options for long term thinking and planning.

I thank you in advance for your reply.

 
 
Most wirehouses offer a fee based model/platform for clients. UBS had 13 platforms when I left.  The teaming is a big thing for them as it keeps the assets and the brokers sticky to the platform.
 
I considered going through an indy broker dealer but lets be honest... you are getting higher payouts but paying your own expenses.  Compliance is basicly the same.  So in the end, I see going through an indy bd as Wirehouse where you pay your own expenses.
 
RIA was a great model, and all of the support is there, from various RIA forums, to the help of custodians like Fred at TradePMR.
Nov 30, 2009 7:40 pm

Breakline-


There are many ways to plan to go indy.


I was with a bank for 10 years and for the last 5 years started planning my business for going indy. What I did was sell "L" share VA's with 1% trail in 13th month and "A" and "C" share mutual funds. All I had to do when I went indy was a change of B/D Form and now I'm continuing to get the 1% trail. Since I went indy I'm doing tax loss selling on "A" Share Mutual Funds and converting to "L" share VA or 3rd party SMA's. 
I've said this in other posts...all you need is 30 mil AUM at 1% in packaged products=300k Fee income @90%=270K to me. Minus expenses of 24K (which is all tax ded) Net $254k. Much better than a bank or wirehouse.
Nov 30, 2009 8:11 pm

I would say not to worry too much about the investment piece - these days most investments are easily transferrable to the indy world. So try to establish an investment platform that would not require a lot of changes when going indy - it will just make life easier (and possibly cheaper if you would incur ticket charges on a lot of positions).  I would say stick with packaged products, and be careful about any third party SMA providors that you could not use at another firm.   And  try to be consistent with product - it will just make life easier than having a hodge-podge of investments (this is good advice even if you are not planning on moving).

 
Also, begin with the end in mind when establishing service levels.  Try to replicate at your wirehouse what the service will be like as an indy.  If you anticipate working without an assistant (at least for a while) as an indy, try not to rely too heavily on your assistant right now - clients WILL get used to that.  Try to establish a communication pattern that does not require an assistant.  Otherwise clients could get nervous if you leave and do not have an assistant.  And obviously, do not over-sell your firm.  Just sell you and your process.  And always drop clues about how YOU provide service, how YOU manage the investment process.  When talking about "other advisors", I always tell my clients "it doesn't matter what firm you are at, it is ALL about the advisor you are working with. There are no BAD firms, just BAD advisors."
Nov 30, 2009 8:28 pm

B24-You hit the nail on the head.

Dec 1, 2009 11:10 pm

OMO - thanks for the reply. Excellent advice on the VA and the Mutual Funds.



Your 30 mil AUM is the argument that got me started thinking Indy. to take home 250K at a wire house, production would have to be about 700K (give or take- I don't know the payout exactly- about 37%) which translates to 70 mil AUM, more than twice the slog of 30 mil.



B24- Excellent advice as well, esp. about the SA and level of service.



Getting to minutia- do you guys miss the comraderie and flow of ideas e.g. other brokers, wholesalers visiting with market views?



Also, how do you handle vacation coverage?



Thanks again.

Dec 2, 2009 2:37 am

If you have a good relationship with wholesalers.... they come to you. also, most of the stuff they talk about, you can subscribe to the email commentary via the advisor sites of the fund families.

i still talk to alot of my buds from UBS and Amp. the phone is a great tool. =)

havent dealt with vacation yet... but shouldnt be bad. =) as long as you are not an order taker.

Dec 2, 2009 8:50 am

"Getting to minutia- do you guys miss the comraderie and flow of ideas
e.g. other brokers, wholesalers visiting with market views?"

I definitely miss this some days -but I also get much more done in a day than before. You don't realize how much time you waste chatting with other brokers until you are on your own. However, I will trade the chats in order to go hit some golf balls at 2pm without feeling guilty of leaving the office early - or getting yelled at by some hack sales manager.