@ EDJ, AUM ~=~ annual income

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Jul 26, 2008 5:00 pm

I was wondering what a decent equation for AUM to income would be for Jones FA's. I have searched and saw that industry wide it is appprox. .5% AUM -or- 30 to 50% of production, throughout one's career, do these still hold true for Jones FA's as well?


Thanks,
DC
Jul 27, 2008 8:59 am

It depends on a lot of things - what point you are in your career, what type of business you do, how much non-asset biz you do (i.e. insurances), how much assets you have (at Jones, big producers get large profit bonuses), etc. Let me explain....



* Generally, you get about 40% payout on most products. Less for discounted stock trades, B sahres, and C shares, etc.



* When you are first starting out (not including your salary, bonuses, etc.), most of your production is "new" money, so you are receiving larger upfront commissions. Later on, you may just be earning trails or commissions on some trades for these assets, so your return on those assets is smaller. So in a commission-based book, your return tends to get smaller as you move forward.



* At Jones, someone with a $150mm book, and say $1mm in production is probably seeing a total return of about 55-60% including profitability bonuses (not including profit sharing from firm).



* Some FA's do a very large percentage of insurance business, which is not correlated with AUM (I find the only ones that have significant production from insurance are doing large estate-planning cases - I just had a guy in my region do 50K gross in one month from one insurance case plus another 50K in gross from regular asset production). But don't expect this when starting out.



* Very early on, you might have $5mm in AUM, but if you land a 500K account, that might bring you a 2% commission. So your return on total assets get skewed.



Bottom line, each wirehouse and regional firm is more or less the same in terms of payout. Each pays in different ways, and most generally reward larger producers more. For example, at Merrll (and my facts may be wrong here) you get little or no payout on acccounts under 100K, but you get enhanced payout on annuitized business. Some wirehouses have graduated payout structures (for production, LOS, etc.). Some firms (such as Jones) have production or profitability bonuses which increase your returns, but you won't necessarily know the number until the end of the quarter/trimester or year.



For annuitized business (SMA, advisory, etc.), you generally receive a 40% payout. The fees can range dramatically, but figure on about 1-1.25% average.



I don't know that I would base an employment decision on payout structure. The reason is, they often change (though Jones rareley changes theirs), and it can be different based on your type of business, and all the things mentioned above.

Jul 27, 2008 9:17 am

B24,

I am actually already currently employed at Jones and was just wanting an idea of what to expect as I build my book of business. i will admit as well that after coming back from summer regionals, I wanted a way to know what the older established advisors were taking away from the table.
Thank you for your response,
DC
Jul 27, 2008 2:54 pm

I still just don't understand where the 40% payout comes from. I work at EJ and if I do 20k gross I never receive more than 39.5% or $7900. Then they take out 400 for insurance and 700 for qualified expenses. That leaves me with $6800 net or less than 35%. The bottom line is unless you are grossing 25k all the time, which in my region takes usually 5 years, you are getting paid much less than 40%. Then it takes about 5 years beyond the initial 5 to earn back those monthly 5% figures that Jones takes just for you personally to break even at the 40% number you assumed when you started. So at 10 years you are looking great, but still getting killed overall compared to an INDY.  

Jul 27, 2008 3:05 pm
Ron 14:

I still just don't understand where the 40% payout comes from. I work at EJ and if I do 20k gross I never receive more than 39.5% or $7900. Then they take out 400 for insurance and 700 for qualified expenses. That leaves me with $6800 net or less than 35%. The bottom line is unless you are grossing 25k all the time, which in my region takes usually 5 years, you are getting paid much less than 40%. Then it takes about 5 years beyond the initial 5 to earn back those monthly 5% figures that Jones takes just for you personally to break even at the 40% number you assumed when you started. So at 10 years you are looking great, but still getting killed overall compared to an INDY.  



Ouch!

Jul 27, 2008 3:05 pm

Ron14,


how long have you been with jones/in the business?
 
 
Jul 27, 2008 3:16 pm

Then they take out 400 for insurance and 700 for qualified expenses.




 
 
 
Please tell me that $1100 are p&l charges, not the cost of your benefits.
Jul 27, 2008 5:18 pm
Primo:

Then they take out 400 for insurance and 700 for qualified expenses.




 
 
 
Please tell me that $1100 are p&l charges, not the cost of your benefits.
The 400 is his cost for his insurance. The 700 is his portion of business expenses, it's great because what other business model gets employees to pay the owners cost for doing business???
Jul 27, 2008 6:45 pm

Ive been with EJ 3 yrs. $400 comes off my cut, before taxes. That number is just to participate in the plan that still has me meet a 5k deductible for my family each year. $700 dollars, just like noggin said, is my portion of business expenses such as newsletters, postage, partial phone bill, office cable, office water, sales literature, fliers, brochures, postcards, toilet paper etc.

Jul 27, 2008 6:59 pm
Ron 14:

$700 dollars, just like noggin said, is my portion of business expenses such as newsletters, postage, partial phone bill, office cable, office water, sales literature, fliers, brochures, postcards, toilet paper etc.

 
Is that standard even the first year you get your office?  $8,200/year seems like a pretty significant expense for someone just a year or two into the business.
Jul 27, 2008 7:16 pm

Cut back on the bowel movements in your office and your payout goes up!  Problem solved.

Jul 27, 2008 7:59 pm

Im in a metro area so it may be a tad more for me, but you cant do it for less than 500 a month. This doesnt include advertising, which is real expensive if you do it on your own. Most guys in my area like to run an ad with 15 head pictures of FA's all in the same ad. I refuse to do that because that is embarrassing.

Jul 27, 2008 11:08 pm
Does EJ deduct for rent?
Jul 28, 2008 8:58 am

no

Jul 28, 2008 9:37 am

Its a great deal for the GP's....charge you like you're an Indy and pay you like a wirehouse rep..."THE BEST OF BOTH WORLDS" da...da...da da....daaaaa

Jul 28, 2008 10:16 am

Yep. Man it hurts to be bent over a conference room table.

Jul 29, 2008 10:58 am

Ya know it is very funny. I do not look at this business any different than a rock star would look at a record label and they are some of the most overpayed people in the world.  EJ may take some money off the back end of the deal on a monthly basis and everyone says they get screwed, but without the thousands of dollars to buy the equipment, get the building, hire a secretary, provide the training, pay for the tests, you may not ever have had a chance to even be in this business. I know i wouldn't have. Who has that kinda cash laying around to start up a business. If you do, i can garauntee you don't need a job. Sometimes you have to take a little bit of a hit to get that initial start-up. Then if you get to where you want to be business wise and do not agree with the finances, go indy or join another firm. It is a great way to get into the business and i think thats the most important thing at this point. Someone who has years of experience in the business, has to the right to want to look other avenues, but a newby or even someone a few years into it should be thankful they didn't have to cut a $150,000 check to the bank.

Jul 29, 2008 1:05 pm

All of that stuff is why they take 61.5%. The point is you are told going in that it is 40% and in reality your below 35% until you hit Seg 3 numbers. I will always be thankful that EJ took a chance on me and that is why I stay at the firm. That doesnt mean I have to think that what goes on is necessarily 100% fair.

Jul 29, 2008 1:51 pm

Who said entire career?

Jul 29, 2008 2:09 pm

Yes. I will always be thankful that EJ took a chance on me and that is why I am with them. Things do change in life. 5 years from now I may be want to fulfill my life long dream of being a member in a boy band. Who knows!