Commission definitions?

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Sep 8, 2009 2:03 pm

Hi all

 
I've heard a couple of different types of language around commissions for institutional retirement plans.  What is the difference between a "first year deposit based" and "asset based trail" commissions? 
 
I would assume that one is based on the assets that actually transfer to the new recordkeeper and asset based trail is smoothed over 12 months and based on the balance in the plan over the course of the year?
 
Help is appreciated.
Sep 8, 2009 2:52 pm

Normally, at least through fidelity, they will pay you on assets that xfered over and new additions in that first year(say 1.0%) then in year 2 you will get bps on the assets in the plan every quarter(25bps).



So say you land a $10MM plan with $300K in contributions. so the first year you would get 1.0% on the assets in the plan($100K) and then an additional 1.0% of the 300K contribution($3K)... the next year you would get 25bps off of 10.3MM in the first quarter(plus growth ) so $6.4K.

Sep 8, 2009 2:53 pm

That's exactly what I was looking for (and what I thought it might be).

 
Thanks for the input.
Sep 8, 2009 8:48 pm
chief123:

Normally, at least through fidelity, they will pay you on assets that xfered over and new additions in that first year(say 1.0%) then in year 2 you will get bps on the assets in the plan every quarter(25bps).



So say you land a $10MM plan with $300K in contributions. so the first year you would get 1.0% on the assets in the plan($100K) and then an additional 1.0% of the 300K contribution($3K)... the next year you would get 25bps off of 10.3MM in the first quarter(plus growth ) so $6.4K.



Your numbers aren't adding up.

Sep 8, 2009 9:36 pm

Ok then lets go slow:



$10MM plan assets transfer over paid 100bps=$100,000.00

$300K in contributions first year paid 100bps= $3,000.00

So total first year $103,000.00



2nd year, first quarter

$10,300,000 plan assets at 25bps= $25750( but it's only for a quarter not the year so divide by 4 = $6437.50





Is that better