Having trouble projecting costs of moving to LPL

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Aug 6, 2013 4:22 pm

I have been contemplating a move from a WH to LPL for over a year now.  As a small producer, I am concerned that if I don't accurately project the costs of going Indy, I could end up taking several steps backwards in my career.  I am conservatively estimating transferring $10 million, or $115k in T12 revenue (my total T12 is $150k).  My practice is 70% - 80% fee based.  Initially, I plan to work out of my home office.  My book is $3m SMA, $2m mutual fund advisory, $3m mutual fund/stock advisory, and $2m Variable Annuities and Mutual Funds (mostly C shares).  My turnover ratio is very low.   How much can I expect to net out after the various fees that are charged by LPL?

Thanks in advance.

Aug 9, 2013 3:09 pm

Your recruiter should be able to give you a very close estimation as to your year-end pay check if you provide projections for number of transactions for each product that you sell. The first part of the equation you need to know are your fixed costs. LPL may charge you for a number of items such as E&0, technology, affiliation fees, SIPC fees, and state and FINRA registration fees. I would ask the question, "If I did not do any trades, how big would my debit be in my account at the end of one year?" Also, if you are planning on setting up your own branch, LPL plans to charge an extra $4,800 per year starting in 2015. Next figure out your variable costs. Something you do not have in a wirehouse that you will experience as an independent is that you pay ticket charges. You typically get charged when you put money in motion such as buying a stock or a bond unless it is in a wrap account where fees may be all inclusive. Figure out what LPL will charge you and estimate how many trades you will do in the course of a year in each category. What payout percentage are they are giving you? Will it vary by product type? You have SMA's, so you should map out the current money managers that you work with and make sure they available to you at LPL. For all fee based business, figure out the SMA fees, LPL's fees, and what will be left for you. As for running the practice out of your home, your expenses will probably be negligible. You need a phone with at least a couple of lines, a good computer and scanner/printer, business cards and letterhead to get started.

If you are smart, you will dedicate some of your income to marketing. The beauty of being indepndent is that all of those expenses are deductible on your taxes, so you can take some chances in order to generate more revenue.

What might help you is if you go to www.cantella.com, they have a book that you can request for free that should help you calculate estimated start up costs. Hope this helps. Good luck.

Aug 20, 2013 1:16 pm

Thanks all.