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Aug 3, 2009 11:41 am

I left a major wire 3 months ago to join an existing LPL office in Chicago.  My T-12 at transition was $150K with $14mm AUM.  I need feedback from other Indy guys on my payout structure. Here's what I give up 40% of production for:


15% for OSJ
10% for experienced full support
10% for nice but small office with phone and network
5% for DBA and seminars/client events.  
 
Other options included offices not as nice with rent starting at $750 per month, 10% for OSJ, on my own for DBA and I would've had to hire temp help or pay 10-15% for support shared with more advisors.  Considering I wanted a plug and play setup, I went with the packaged override described above.  I know it's no deal, but what else does a young advisor in full growth mode do to leverage capabilities?  This has allowed me to soley focus on asset gathering and as a result I've retained $10mm and am pacing $120k.
 
Of course, I contemplated the bare minimum of finding the cheapest office and OSJ, using LPL as DBA and hiring a temp - I didn't want to have a rent check due each month, nor did I want to waste time handling a temp admin amidst the most imperative task of moving clients over.  Any thoughts?  Thanks.
Aug 3, 2009 12:03 pm

Thanks - that was confidence inspiring.  I'm asking again as it's been several months since I originally shopped offices and independents.   My agreement is negotiable after 6 months.

Aug 3, 2009 12:20 pm

This is the biggest variance in the indy world...Depends what you want? By the way you don't have to use LPL as your DBA, you could set up an Corp or LLC and pick a name.



A lot of variables. How many other reps are in there? And what is average production.. The reason i ask is because this helps figure out what those expenses are adding up to..



Could you explain the last 5% a little more. What does this include. Are they paying for the seminars/client events for you? Or do they do a seminar and then split the contacts?



On the OSJ overide side I have a friend who does it for 10% but 15% isn't rare

Aug 3, 2009 1:50 pm

You're new ... so all of your clients paid to transfer assets to you once and that was in the recent past. Then you moved to LPL and they had to pay again. Now, LPL will ask them to pay again if you leave LPL. I dunno about that at all.


Since you asked for an opinion ... at $12K per month, you need "experienced full support" like you need a hole in the head. That's just you being lazy. You need someone to answer the phones for you and that costs $60 a month, outsourced.
 
That said, several choices available with far, far higher payouts than LPL. If you like the whole "office" feeling, I have to wonder why you went indy ... otherwise, lose them. But if I'm your client and you're moving for the second time in four years (this is a guess) ... I'm beginning to wonder about my rep.
 
I'm just sayin, is all ... if I were you, I'd say I made my bed now I'm going to sleep in it for a couple of years.
 
 
Aug 3, 2009 1:55 pm

If you want all that support, as opposed to working out of your bedroom, then I think it's fair.  Once you get your busienss to the point of self-sufficiency, then you can move out on your own.


I will say, it sounds like a pretty sweet deal for your boss.  He gets 40% of your production and his costs are probably about 3%.  What is your B/D payout, and how much are you paying in ticket charges, E&O, and other expenses?  Let's assume you get a 90% net payout, and you pay another 3% in ticket charges.....you're now down to the high 40's total payout?  Honestly, it seems as if at the end of the day, you are approaching wirehouse payout numbers.  I just hope for your sake it is worth it.

Aug 3, 2009 2:08 pm

If you don't want to pay, go out on your own with LPL(osj yourself) then you decide what you need.

Aug 3, 2009 2:09 pm
LockEDJ:

You're new ... so all of your clients paid to transfer assets to you once and that was in the recent past. Then you moved to LPL and they had to pay again. Now, LPL will ask them to pay again if you leave LPL. I dunno about that at all.

Since you asked for an opinion ... at $12K per month, you need "experienced full support" like you need a hole in the head. That's just you being lazy. You need someone to answer the phones for you and that costs $60 a month, outsourced.



That said, several choices available with far, far higher payouts than LPL. If you like the whole "office" feeling, I have to wonder why you went indy ... otherwise, lose them. But if I'm your client and you're moving for the second time in four years (this is a guess) ... I'm beginning to wonder about my rep.



I'm just sayin, is all ... if I were you, I'd say I made my bed now I'm going to sleep in it for a couple of years.







Have you every used any of the outsourced services? Any reco's?

Aug 3, 2009 4:34 pm

Thanks for all of the feedback.  To clear up confusion, I plan on building a long-term business at LPL and would not leave after just arriving here - that would be asinine.  I wouldn't even want to begin a conversation about that! I may, however, entertain moving locations and/or becoming my own OSJ now that I'm past the initial shock of transition.


Squash 1: There are 2 other reps in this office, each doing $350-400K.  I saw documentation of $184k for Q1.  The 5% includes all DBA letterhead, envelopes, wealthvision, share of website and split access for all seminars and events.
 
LockEDJ: I'm not leaving LPL, just evaluating whether or not I should take the 24, establish an S-corp and find cheaper office space.
 
B24: Ticket charges are minimal.  I do alot of funds and SAM I..equity and fixed income trades charge the client.  E&O was $512/quarter when I arrived and, of course, it immediately increased to $650.  Can you believe this - I moved in mid May and I still had to pay for the full quarter.  That's the first F*ckjob that i spotted.   Also, I'm not licensed in many states and I only subscribe to PRT in addition to Branchnet as I don't most of the fancy stuff to run business yet. Cheap health insurance and other LPL fees add up to around $300 per month.
 
If any of your buddies are moving here, advise them to ask for a seasoned transition specialist.  The one assigned to me piece-mealed the whole process together and I had to re-do all the documents and reg requirements less than 2 days before I resigned.  Some the night before! 
Aug 3, 2009 4:58 pm

B, what is your payout from LPL?  It still seems at the end of the day your net/net is pretty low for an independant (at least from what everyone seems to say on this site).  90-95% payout from LPL, then 40% to your OSJ?  So would you estimate your total net payout after all expenses at around 50%?

Aug 3, 2009 5:00 pm

It's not a terrible deal... Isn't wealthvision like $300/month. and letterhead and envelopes aren't expensive but not cheap either if you use a lot.



I would stay at this level til you have xfered all your clients over, then try to renegotiate the numbers based on production, so 10% on 120k is $12K but on 175 is $17.5K. So maybe decrease in % you pay based on increased production.

Aug 4, 2009 10:40 am

Emoney frowns on sharing a lic. Just know you are breaking the rules

Aug 4, 2009 11:43 am

Yes, wealthvision is about $300.  Did $10k last month:

 
8550 after LPL's take (some products paid at 90% others at 76.5%)
-300 in ticket charges
8250
*60%payout
=4950
-287 for monthy tech and reg fees
-180 for health and dental (not sure how you guys count this..but coming from the employee world..i consider it an line-item expense on my production here)
=4483
 
Payout is hovering around 45-50% after everything.  definitely lower than most and only 15-20% higher than where i was at prior.  The problem is I cannot let production slip or i'm in trouble.  But, I'm much happier and I have that drive I had when i began 3 years ago - for me, that's huge.  All I'm doing is focusing on production.  Barnone.  pounded out 40 or so dials so far today, did $1300 in gross and have a dozen appointments this week.  Cant  do that when you're d***ing around sending out forms, opening accounts, learning new procedures, answering phones, meetering envelopes, etc.  I take that back.. it's possible..but not ideal, efficient, nor does it make business sense...and the odds will not be in one's favor to grow...at least that's what i see in today's market..
 
thanks again for the input guys. 
Aug 4, 2009 12:28 pm

I think it is a fair deal for a plug and play, particularly for someone still in a growth mode. I don't think you could replicate the support and overhead you're getting on your own for the roughly $40k/year you're paying. And you would certainly be robbing yourself of focused prospecting time to do so.



You get what you pay for.........


What I would do, is make sure there is a "grid" in your arrangement where it changes by another 20% in your favor once you hit say $20k/month in production.
Aug 4, 2009 1:58 pm

If you want you can talk fees, e&o, ticket charges, etc....but the big picture is you are building "EQUITY" in something that is all yours. Your business can be your retirement income stream one day if you want or you can sell it for a lump sum. Also you probably don't have quotas to meet which means you will live a longer happier life:) A few years down the road you will kick your feet up on your desk and say "my job is freakin sweet" like me and laugh at everyone else.    

Aug 4, 2009 6:05 pm

Northfield - I think the grid arrangement at a higher production level is a great suggestion and seems fair for both parties.  I'm working on negotiating a residual payout on any guys I refer to this office too.  In 3 months, I can bargain and ask for a 5-10% increase if at a certain level.  If they decline, I can re-shop one of 4 offices nearby.  At that point, I don't think the 2 guys here would say leave with each standing to lose approximately $1800 per month in profit from my production.  If i ran the office, I'd say just give the guy what he wants unless he's a hassle.

 
indythankgod, that's why i'm here!  I don't get why anybody with LOS under 5 years doing sub-400k would stay at a wire unless they had a tremendous succession opportunity with a team they trusted.  This even goes for some of the regionals now too.  A year ago, RJA offered me a decent deal and I'm glad I didn't take it.  Now, the same office will only take guys doing $600k+.