VA payout

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Dec 22, 2009 4:06 pm

At Jones, a 100,000 Lincoln Choice Plus A share Var Annuity pays 2750 gross, 1100 net to the advisor. How does that compare with an independent? I have heard that Jones gets a back-door cut from the ins co, but I just can't believe it.

Dec 22, 2009 4:10 pm

All wirehouses and Jones have a haircut for the VA products but you won't be selling the A share VA outside of Jones. Hope that helps.

Dec 22, 2009 6:03 pm

a share? as in bigger commission longer surrender?

that actually seems like a low payout. Street on a typical a share or a b share annuity is 5 to 6% with a 6 to 10 year surrender.

L shares paid around 3.5% to 5.75% for a 4 year surrender.

So seems to me, they are taking about half. =)

Dec 22, 2009 7:52 pm

4 to 5% on an A share.  At a wirehouse you would keep maybe 40% of that.  At an independent 80%.  But, don't forget that when you are independent you pay the rent, the office salaries, the postage, etc etc.

You really should not even consider going independent until you can produce at least $100,000 a year on a repeatable (fee)based business.
Or you will just starve slower.
Dec 22, 2009 8:35 pm
vbrainy:

4 to 5% on an A share. At a wirehouse you would keep maybe 40% of that. At an independent 80%. But, don't forget that when you are independent you pay the rent, the office salaries, the postage, etc etc.

You really should not even consider going independent until you can produce at least $100,000 a year on a repeatable (fee)based business.

Or you will just starve slower.





Good advice, thanks

Dec 22, 2009 10:36 pm
vbrainy:

4 to 5% on an A share. At a wirehouse you would keep maybe 40% of that. At an independent 80%. But, don't forget that when you are independent you pay the rent, the office salaries, the postage, etc etc.

You really should not even consider going independent until you can produce at least $100,000 a year on a repeatable (fee)based business.
Or you will just starve slower.

That is where I must disagree.

You can still do insurance production. You dont need to start with a 2k sqf facility, your fees are not all that bad. All in, my fees are under $800 a month, for a modest office, e&o, phones, internet.

If you have savings built up, guess what, just like when you started in the biz, you dont pay yourself as much. But if you are writing 100k in business at a wirehouse, fee based, that is 40k income.

If I write 50k, so half of that, after expenses, I am still there. lol. obviously those are very low numbers, but you dont NEED anything to go independent. people are wirehouses are bred to think that without high production they will starve to death.

In the insurance world, you start 100% commissions day one. There is no salary. Personally, I am now of the believe that giving someone a salary is a waste of money. People learn to depend on that one constant paycheck and will do the bare minimum to keep it.

I got to say, as an independent right now, in the first 2 months of business, not including the former accounts I am bringing over from my wirehouse and ameriprise days, I am aquiring 4 brand new clients a month, even though I am not focusing on it, and my focus being on bringing over past clients. From the business I am bringing over, I am writing new business on new assets on top of that.

Just think of all the people the wirehouses gave salaries to. 95% of those folks drop out of the business anyway in a year or two, and for most, they only hung on until they were let go or salary ended.

I am currently interviewing for IAR's to bring onto the firm, and telling people upfront that there is no salary, weeds out the hard workers from those that want to dabble in the industry with a safety net.

One guy I have in mind, applied to work for me, had a past with raymond james or edward jones, one of those two, and he did IT for ML before that. Smart guy, wants to be a CFP... wants to do the right thing for his clients. Was at his place for a year and a half.... finally let go. I asked him why... he said it wasnt a good fit as he wanted to do right thing for client, charge them a flat $250 a year fee, or what not. That caught my interest...

I ask him the all important question... how much did you have under management. He said he brought in like 5 accounts for a total of $300k.

This is where the haircut from the wirehouses goes to.... to pay geniuses like that their $50k salary so they can test if they want to be suze orman of a wirehouse.

then again we are not all wired the same anyway. and I am sorry for thread-jacking this.

Dec 22, 2009 11:29 pm

With Jones, my rent is $1800, phone and utilities $200, data services $500, BOA salary and benefits etc. I can cut that cost significantly by going independent.

Dec 23, 2009 10:33 am

YOU DON"T PAY THAT SCHMUCK!!!!

 
Your rent is $0, your utilies or $0, data service $0, boa $0, and in exchange for that you get 40% payout...
 
Do this for yourself.
 
Give yourself an 80% payout off last month... then subtract office,phone, utilities, e&0, association fees, ticket charges, postage, advertising..
 
Then add up the cost upfront of furnishing the office with, desk, computers, printers, office supplies, marketing..
 
I think you will see that 80% payout decrease to a much small number.. And remember all that stuff gets paid before you make a dime.
 
You are new so lets assume you do $8K/month in production.
At EDJ
[email protected]%=$3200 before taxes, insurance etc...
 
Indy
[email protected]%=$6400 before taxes insurance etc... Pretty big difference but wait...
$125/phones
$100/postage
$1500/rent(similar place to jones)
$200 association
$200 e&o
$200 utilities
$200 ticket charges
$250 advertising..
total:$2775
 
New total before taxes:$3,625 before taxes, insurance, but remember you are self employed so you have to cover what EDJ covers for taxes for their employees..
 
So that would make you damn near even..
 
The expenses are made up, but probably close... So even, with no BOA or national advertising or walkins, so your production would probably drop... So you would actually make less.
Dec 23, 2009 10:46 am
chief123:

YOU DON"T PAY THAT SCHMUCK!!!!

 
Your rent is $0, your utilies or $0, data service $0, boa $0, and in exchange for that you get 40% payout...
 
Do this for yourself.
 
Give yourself an 80% payout off last month... then subtract office,phone, utilities, e&0, association fees, ticket charges, postage, advertising..
 
Then add up the cost upfront of furnishing the office with, desk, computers, printers, office supplies, marketing..
 
I think you will see that 80% payout decrease to a much small number.. And remember all that stuff gets paid before you make a dime.
 
You are new so lets assume you do $8K/month in production.
At EDJ
[email protected]%=$3200 before taxes, insurance etc...
 
Indy
[email protected]%=$6400 before taxes insurance etc... Pretty big difference but wait...
$125/phones
$100/postage
$1500/rent(similar place to jones)
$200 association
$200 e&o
$200 utilities
$200 ticket charges
$250 advertising..
total:$2775
 
New total before taxes:$3,625 before taxes, insurance, but remember you are self employed so you have to cover what EDJ covers for taxes for their employees..
 
So that would make you damn near even..
 
The expenses are made up, but probably close... So even, with no BOA or national advertising or walkins, so your production would probably drop... So you would actually make less.
 
All of those are business expenses if you are self employed......If you are not capable of doing at least 10-12K per month you really shouldn't be independent anyway.
Dec 23, 2009 11:48 am

This is a reasonable analysis.  However, the big variables are that in the independant world, you compeltely control your costs.  If I were independant, I would pay about 1/3 of the rent that Jones pays on my behalf (my office kicks arse), I would hire my wife or a VERY part time assistant, and my tech fees would not be $1250/mo.  Everything else would be almost the same.  I calculated that at about 85K gross or higher, I could net more being an independant RIA.  Now this break-even number would be higher for many FA's, but I have pretty high overhead (my office is expensive), and could find it much cheaper elsewhere.


There are some variables - health insurance, taxes, etc.  But basically right now, I would net much more being independant.
 
The other problem is that it is going to take a lot of gross for me to make a decent office profit bonus.  I need to do about 350K gross to get much of anything.  At 350 gross as an indy, I would net about 100K more than at Jones.
Dec 23, 2009 1:01 pm

moreover, if you're only speaking to independents paying 80% at the 100K production level ... well, you need to look a whole bunch more.

Dec 23, 2009 7:59 pm

I get 90% as in Indy and my expenses are less than $2K a month which includes everything. No, I don't have or need an assistant and I'm on my wife's benefits plan.



$250K in annual rev at 90% - $24K annual expenses = $201K income



or



$250K at 40% (wire) = $100K



Indy is not as difficult as you think.



I sell L-share VAs an get 4% upfront with 1% trail in year 2.

Dec 27, 2009 4:51 pm

Omar,

 
Has the bank come after you for moving your assets? How strict are they on that anyways?
Jan 4, 2010 12:06 pm
ChrisVarick:

Omar,

 
Has the bank come after you for moving your assets? How strict are they on that anyways?
 
Haven't heard anything from my former employer.  I was careful about what was sent to my clients after I left.  I would also say that my bank had many other problems to deal with at the time of my departure.