Newbie offer – is this a bad deal?

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Aug 28, 2012 12:48 pm


An established one-man RIA (& CFP) asked me work in his office.  He focuses on portfolio management, not planning.  He wants me to do fee-only planning exclusively.  I will keep all the income from planning fees.  He will keep all income from portfolio management fees.  He is willing to pay a small salary for the initial 6 months, but after that I’d be on my own.  Then we would split office overhead on an ongoing basis.



I’ve passed Series 65 and CFP exam but not started work experience requirement.



I know we’re missing a lot of important details but that’s all we’ve got thus far.  And I’m not sure what questions I should ask to protect my end.



If this is a common type of work arrangement in the industry?  Can a new planner make a living by just earning planning fees without commissions or management fee  (a new planner cannot demand high fees)?  Am I being set up to be the de facto prospector for his portfolio management business?  What details should I focus on to negotiate this into a fair deal?  What other questions should I be asking? 



Thanks for helping a newcomer out!

Oct 13, 2012 3:29 pm

I know someone who charges $1000-10,000 for financial plans and they made $80,000 gross in financial planning fees last year based on bringing in new assets of $45,000,000. At 1%, their management fees would be $450,000 gross, and that is trailing. In 5 years they will have $2.25 million gross trailing revenue. Your trailing revenue will be $0.
Will he be paying for marketing costs? There is no way this arrangement makes sense long term. Short term it would be a way to supplement building a book - if you agree to do his plans with an agreement not to solicit his clients- but still be able to market and keep your own set of clients. But i would not commit to doing it exclusively. In five years he won't need to market new business and you will have to start over elsewhere.
Maybe something like 75-25% split. You get 75% of plan fees and he gets 75% of AUM fees and you get 25% of those to keep you going with some sort of trailing revenue.