RIA-Asset Management...SMA only

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May 5, 2011 12:45 am

Ok, never post but thought I would this evening about an opportunity that has been presented to me. A local RIA, that only uses SMA's with 10 or so proprietary strategies has offered me a position with the firm. I am thinking that it isn't a good deal, but not sure so I am looking for some guidance.

The offer...of the fees I generate, I get 22.5% as salary.

Example, $1,000,000 into Large Cap Strategy, $12,500 in fees and take home is $2812 or $234 per month.

My main question is whether or not I am getting low balled on this offer, and how do invesent management companies (asset managers) typically pay a business development employee?

The positives are that the company has a ton of backing by some very influential investors and while it is a startup, the team has significant experience in this space.

Thanks in advance.

May 5, 2011 2:02 pm

IARs at my firm get 1/3 of all AUM fees and 1/3 of all hourly fees.  1/3 goes to the firm for expenses (no desk fees, firm fees, insurance costs, cell phone, marketing costs, etc) and the remaining 1/3 goes into a bonus pool for quarterly distributions. 

At the end of the year the true income generated is about 41% per IAR.  We also charge 2% on all accounts under 1mm.

Example, last year a new IAR brought in 6mm.  He took home 40k upfront off AUM, 26k off hourly fees, and bonused out at 10,400 and 5,200 AUM fees and hourly fees respectively.  Brought 198k of revenue to the firm and total comp just shy of 82k, not bad for a recent college grad.

May 7, 2011 12:50 pm

Thanks!!!

I forgot to add that the firm is going to throw in a salary for the first year, about $50k plus payout at 36%...so that is nice. After the first year, only payout at 36%. At least that is the deal I negotiated.

May 10, 2011 9:19 pm

If you have $10MM, why not just start your own RIA or go Indy?