Indy expenses

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Sep 17, 2009 10:53 am

Sorry for long post, but if you have a minute I could really use some input.

 
The stars seem to be aligning, and I'm giving a serious look at hanging out my own shingle.  I'm trying to get a handle on my expenses, especially what the monthly nut will be before I get paid.  I ran through the Ray Jay independent contractor calculator, and want to get some opinions on how realistic my numbers are. 
 
A couple notes:  I know the rent is super cheap.   It's also accurate.  I believe I am going to be able to do a "change rep" and stay with the same BD I currently have, so there won't be ACAT fees to move my accounts.
 
STARTUP
 
0 rent deposit
2000 leasehold improvements
3000 furniture
4000 3 computers
2000 copier/scanner/fax - anyone know if this is an accurate # for a good quality all in one?
1000 telephone
500 Legal/accounting fees
300 Office supplies
500 stationary/business cards
500 initial advertising
500 registration fees
 
$14,300 startup costs
 
MONTHLY EXPENSES
 
3500 salaries
500 office rent (utilities included)
500 telephone
0 Advisor's Resource Technology (another I think is probably a Ray Jay thing)
0 Real-time market data service (I probably don't need this)
100 Accounting fees
500 Health insurance (employees have spouses that provide insurance, so just for me)
50 P&C Insurance
300 Advertising
500 Postage (I do quite a bit of direct mailing)
50 Supplies
50 Subscriptions
100 Annual registrations
250 FA Fee (Ray Jay, but assume I will have something similar, E&O is in this #)
 
$6,400 monthly nut to break even
 
What am I missing?
 
Sep 17, 2009 11:00 am

Do you work out of an office now?  Trying to figure out if all of these are incremental to wherever you are now.  I assume that's why you didn't include ticket charges?


Do you have enough in your marketing/postage budget?  I woudl think you would want to do more for website and literature.
Sep 17, 2009 11:21 am
EDJ4now:

Sorry for long post, but if you have a minute I could really use some input.



The stars seem to be aligning, and I'm giving a serious look at hanging out my own shingle. I'm trying to get a handle on my expenses, especially what the monthly nut will be before I get paid. I ran through the Ray Jay independent contractor calculator, and want to get some opinions on how realistic my numbers are.



A couple notes: I know the rent is super cheap. It's also accurate. I believe I am going to be able to do a "change rep" and stay with the same BD I currently have, so there won't be ACAT fees to move my accounts.



STARTUP



0 rent deposit

2000 leasehold improvements

3000 furniture

4000 3 computers

2000 copier/scanner/fax - anyone know if this is an accurate # for a good quality all in one?

1000 telephone

500 Legal/accounting fees

300 Office supplies

500 stationary/business cards

500 initial advertising

500 registration fees



$14,300 startup costs



MONTHLY EXPENSES



3500 salaries

500 office rent (utilities included)

500 telephone

0 Advisor's Resource Technology (another I think is probably a Ray Jay thing)

0 Real-time market data service (I probably don't need this)

100 Accounting fees

500 Health insurance (employees have spouses that provide insurance, so just for me)

50 P&C Insurance

300 Advertising

500 Postage (I do quite a bit of direct mailing)

50 Supplies

50 Subscriptions

100 Annual registrations

250 FA Fee (Ray Jay, but assume I will have something similar, E&O is in this #)



$6,400 monthly nut to break even



What am I missing?





Those monthly expenses look a little high. $500 for phone? $3500 salary - are you paying a Paraplanner?    Also, health insurance seems a little high, even for a family plan. Do you have preexisting conditions?



Also, for startup money - What kind of computers are you buying? We bought Macs, so ours were about that high, but if you are using PCs, you should be paying about half of that. Furniture - try to get it it used - Storr is a good place. I got some really nice furniture - $10,000 worth, for $2700. Small little damages. You can get a decent all-in-one for about $300. Get a last year's model. I bought a nice printer for $400, and then an all-in-one for $250. Your legal/accounting fees seem a little low, but since you are not setting up an RIA, I guess that's about right. I spent $2k on initial advertising, and about $1200 on registration fees.



I also spent a lot more overall than you are projecting (approximately $22k). I made and bought brochures, folders (expensive), envelopes, etc.

Sep 17, 2009 12:01 pm

$500 for health insurance seems high??  What kind of coverage are you talking about.  In my previous career, we were paying $1200/mo. for premiums (I didn't pay for them, my firm did).  I guess you could get a pretty high-deductible plan with low coverage, but $500 can't possibly go very far for a family??

Sep 17, 2009 12:08 pm

I pay $381/month. $500 deductible, $20 co-pay for general visits, $30 for specialists. 80/20. If you add dental, it would be more. But it is more cost effective to pay for your twice a year cleanings out of pocket. Vision too.



I can't believe your premiums were that high. Also, group insurance can be pretty high for companies. If I was giving my employees health insurance, and I was on the group plan, I would be paying $800/month just for myself. Individual insurance is much cheaper.

Sep 17, 2009 12:20 pm

Thanks for the feedback.

 
I am actually in a bank, but we use a BD that has independent producers, and it sounds like they would be ok with me staying with them, just on my own rather than under the bank.
 
The health insurance is based on an internet quote for a high deductible plan, either $3,000 or $5,000, I don't remember.  I think my current group insurance is over $1,000, I pay about $300 a month for my contribution.
 
I didn't really think about a website or doing much for literature.  How much should that cost?
 
The salary is probably high, I'm including 7.5% for SS & Mcare, and giving myself 1 full time employee and 1 1/2 time employee.  It will probably be less, at least until I am comfortable I can afford the 2nd person. 
 
I didn't think the $300 all in one would be adequate for true office use, am I wrong about that?
 
I know IndyOne is a proponent of spending $$ on computers, and RayJay suggested $2,000 each.  I thought that seemed high too.
Sep 17, 2009 12:29 pm

I paid 1700 for my HP all in one printer.  If you plan on running a lot of copies...I would not skimp on this.  You don't want to be down and trying to print opening acct forms or portfolios.  I was down for 1 day this past summer because of a software glitch...it was very frustrating.  The budget you have for computers would be about right if you include the setup and networking of them.  Software is another item I didn't notice, such as contact manager. 

Sep 17, 2009 12:53 pm

Definitely do not skimp on the copier/printer. There is a great deal of paperwork at the start. You may consider leasing a commercial grade all-in-one.

Sep 17, 2009 1:23 pm

For me, all paperwork is submitted electronically, except for the signature page. Even on one hundred accounts, that's only a hundred pieces of paper. I put all disclosure documents on a cd to give to clients.



It may be different for you guys, but it's pretty simple for me.



A simple, small all-in-one works fine for me. Even with multiple employees. Up to you though.



Like I said, if you use last year's model, you are looking at significant price cuts (up to 70% on our all-in-one and 50% on the printer).



For the record, I started with and still have a "true" office. Four-person with a reception area as well. Since you are going indy with a B/D, I guess it's different.



Sep 17, 2009 1:31 pm
Moraen:

I pay $381/month. $500 deductible, $20 co-pay for general visits, $30 for specialists. 80/20. If you add dental, it would be more. But it is more cost effective to pay for your twice a year cleanings out of pocket. Vision too.

I can't believe your premiums were that high. Also, group insurance can be pretty high for companies. If I was giving my employees health insurance, and I was on the group plan, I would be paying $800/month just for myself. Individual insurance is much cheaper.

 
I guess it's the 80/20 that kills it.  My plans have always been 100% coverage, no deductible (although the past few years I took a high-deductible w/HSA and 100% coverage).
 
Why would individual plans be less?  I assume it has to do with underwriting, adverse selection, etc.?
Sep 17, 2009 2:06 pm
B24:
Moraen:

I pay $381/month. $500 deductible, $20 co-pay for general visits, $30 for specialists. 80/20. If you add dental, it would be more. But it is more cost effective to pay for your twice a year cleanings out of pocket. Vision too. I can't believe your premiums were that high. Also, group insurance can be pretty high for companies. If I was giving my employees health insurance, and I was on the group plan, I would be paying $800/month just for myself. Individual insurance is much cheaper.



I guess it's the 80/20 that kills it. My plans have always been 100% coverage, no deductible (although the past few years I took a high-deductible w/HSA and 100% coverage).



Why would individual plans be less? I assume it has to do with underwriting, adverse selection, etc.?





I'm no health insurance expert, but I think it's because that group plans really don't lower overall risk. If you think about it, you have a small group of ten people. I am in triathelete shape (or at least swimming shape), so I get preferred plus. But then there is the 60-year old woman who chain smokes but does a damn good job and the clients love her. And average people and so on and so forth.



People who have problems or potential problems tend to raise the premiums for everybody else. Especially in group plans. If I'm an individual who is in good shape, doesn't smoke, drinks alcohol only when he posts at night, and has never had a health problem (other than combat injuries - which the VA takes care of), my premium is lower.

Sep 17, 2009 9:07 pm

What production level are you at that you need a full time asst and a part time? $6500/month just to break even is a rather large nut for one FA.

Sep 17, 2009 10:21 pm

These numbers seem way out of whack unless you are a pretty large producer.
I manage ok without an assistant. I pay 1300 a month for a one room office in an executive suite. That includes phone, internet, fax, unlimited calls. My only other fixed expense is the charge from my B/D, ABOUT $600 a month, which includes E & O and E-Signal. Thats it.  I'm not a big producer, but with that kind of overhead you dont need to be.

Sep 18, 2009 6:37 am
Sportsfreakbob:

These numbers seem way out of whack unless you are a pretty large producer.I manage ok without an assistant. I pay 1300 a month for a one room office in an executive suite. That includes phone, internet, fax, unlimited calls. My only other fixed expense is the charge from my B/D, ABOUT $600 a month, which includes E & O and E-Signal. Thats it. I'm not a big producer, but with that kind of overhead you dont need to be.







Yeah, seriously I recently went Indy and I don't have nearly that amount in monthly expenses.   Can you share expenses with another Advisor?

Sep 18, 2009 9:22 am

Although I don't really like the "one-room" setup, I also don't think you need a full-time assistant making $20/hr. to start (inclusive of payroll tax).  I would think a "mom's hours" assistant to process paperwork and asner the phone during busy hours would suffice, making maybe $14-16/hr.  I think you could get away with $1500/mo. in payroll and get almost as much efficiency.  Unless you have a really busy/mature practice with a lot of clients (and an active investment style), nobody needs a FT assistant.

Sep 20, 2009 5:38 pm

um... get a college intern. Free.

Also, $500 a month for phones? Are you nuts? I just set up optimum online, phone and internet, unlimited for $59.99 for both. Each additional line is $30.

Sep 20, 2009 11:22 pm

who is that with?

Sep 24, 2009 12:14 pm

My lease is ending in jan. so I have been scouting new locations(this was just temp for a year because I needed to find a place quick). So here is what I am looking at:



I. 500 sqft office, in downtown suburb(35,000) right on "main st", but tucked back a little(so not viewable from street, but I am ok with that)... priced gross @ $12/sqft.



II. 500 sqft on busy street, with close access to interstate(3 miles) in a town with a higher affluency... 1 story office building with many suites inside and monument on road showing occupants.... priced gross @ $14/sqft.



III. Have been talking to 2 insurance guys, who owns their buildings, and willing to rent me a 200sqft place for about $300/month.



Sep 24, 2009 1:01 pm

Wow, that's a pretty small office.  Are you by yourself?  I assume you can't fit an assistant.  I can't remember your setup, are you with an indy B/D doing primarily investments?

 
I would prefer #1 I think.  Unless you are a big ensemble firm, I don't like the big "office building" feel.
 
#3 seems pretty small.  I have about 1100 sq. ft., which is more than I need, but my actual office part is about 500 sq. ft.  The rest is reception area, conference room (I have another FA in there right now), and storage room.
 
I still have a hard time dealing with the "no assistant/single office" setup.  I can't envision real high net worth folks being comfortable with that.  I have a lot of clients/prospects ask me where everyone else is, and then look strangly at me when I say it's just 3 of us.
Sep 24, 2009 3:18 pm

Our setup is about 1000 sq ft....one assistant and 3 reps. It's a nice fit. 4 reps would be too much for one assistant but 3 seems to be right.