First year expectation with a head start

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Feb 18, 2010 2:56 am

I just finished college with a degree in economics and I am exploring different career paths.

My mother recently inherited 1.6 mil, the problem is that she is financially uninformed and stressed that she will not be able to hold on to it. I am thinking about becoming a FA for many reasons, taking care of my family is just one factor.

Will this be a good book to start with? Seemed like it was at first but from reading the forums, this sum is dwarfed by the goodknight programs.

What type of income can I expect for myself from just managing her assets?

Feb 18, 2010 8:04 am

Tough call... you are going to manage your familys money with no experience at all??



If you are talking about "goodknight" programs then obviously you are at Jones(or want to be).. Slam her in A shares!
Feb 18, 2010 8:11 am
chief123:

Tough call... you are going to manage your familys money with no experience at all??



If you are talking about "goodknight" programs then obviously you are at Jones(or want to be).. Slam her in A shares!



Then he'll make zero. Most funds sell shares at NAV to family members.


Feb 18, 2010 8:21 am

If he wants to "take care" of his family then A shares would probably be a good way to go.  I would feel a weird conflict of interest if I was considering making a living off of managing my mom's newly minted inheritance.  I'm sure that money would pass right on down to you eventually, but whatever you ended up getting paid on it would be coming right out of her pocket.  Just for $hits and giggles, on a $1.6 mil account it would be reasonable to gross over $30k.

 
$250,000 - Non-qual annuity (5%)
$160,000 - Private REIT's (5%)
$750,000 - A couple SMA's (1.25% to you)
$440,000 - Wrap account (1% to you)
 
$12,500 GDC from annuity + $8,000 from REIT's + $9,375 from SMA's and $4,400 from Wrap = $34,275.   That is how much you would gross, then depending on your payout is what you would net.  And the SMA's and Wrap would be an annual payout each year, where the annuity and REIT's are upfront commissions and thats it.
 
Feb 18, 2010 10:37 am

1.6 mil is not a good start.  If you put her in mutual funds, which a good chunk of her money will end up in, you will make $0 because she is family.

 
If she was not family, 1.6 mil is a nice first account, but won't feed you for your first year.  Your firm would be far from stoked if you sat on 1 new account all year.
Feb 18, 2010 11:35 am

Call Chief 123, he specializes in accounts worth 1.6mil.  Right Chief ?

Feb 18, 2010 11:36 am
iceco1d:

Correct me if I'm wrong, but wouldn't most fund families give you 1% up front on a $1MM ticket, even though the client wouldn't pay anything up front (but the client would have a 1% CDSD for a year)...that was my understanding, but then again, I don't do much commission business.


Plus, he wouldn't make ZERO.  He'd still get 12b-1s, which would be about $3,500 - $4,00 a year gross. 
I know this from experience.  American Funds NAV for immediate and extended family (including parents).  Hartford, immediate household only.  Different fund families have different NAV policies. 
Feb 18, 2010 12:32 pm
iceco1d:

Right, I know.  But I'm saying the FA doesn't HAVE to offer the funds at NAV.  Plus, if they are getting in @ NAV anyway because of the $1MM + ticket, might as well let the guy get the 1% up front, and the parents can take the 1% CDSC for a year...if I'm correct on that, as to how a $1MM ticket @ 1 fund family works...

I had a run in with Field Supervision on this early on in my still short career.  If the relative is eligible for NAV, they get NAV.  Case shut.  My point being, if you want the comish from a relative's account, make sure you know what the NAV policy is for the fund family before you drop the ticket....
Feb 18, 2010 6:58 pm

You could diversify her into 50 different mutual fund families.... What's 5.75 x 1.6 million.
Maybe 99k gross?
That would get you brought to the front at the regional meeting and you could talk to your other newbies about 'doing the work' and 'following the recipe.'

Feb 18, 2010 8:04 pm

The only family members I've ever heard of being eligible to buy @NAV are spouse and minor children. 

Feb 18, 2010 8:25 pm
BerkshireBull:

The only family members I've ever heard of being eligible to buy @NAV are spouse and minor children. 



FT sells to parents at NAV.

Feb 18, 2010 8:38 pm

You don't even need your securities license to "help" your mom.

 
Put her in an index annuity and you could make as much as $144,000.  Do it.  Do it.
 
And it gets better.  Create trails for yourself by taking the 10% free withdrawal every year.  So in year 2, you'd take out $160,000 without penalty and make as much as $14,400.  Keep doing it, so in year 3, you could take out $144,000 and make as much as $12,960.  By the time you get done taking 10 years worth of free withdrawals, the first one you did will almost be out of surrender and you can roll that amount into a new product.
 
All you need is an insurance license which will take you a week.  Then you can buy a Porsche to drive your mom around in.
 
In all seriousness though, I'd bet many "new" FA's fcuk their family over since they are new.  Oddly enough, the family would've been better off in an index annuity.
Feb 18, 2010 11:54 pm
buyandhold:
BerkshireBull:

The only family members I've ever heard of being eligible to buy @NAV are spouse and minor children. 



FT sells to parents at NAV.

 
As does Fidelity and Oppenheimer
Feb 19, 2010 8:47 am

Unless they've changed your policy, FT will give a NAV waiver to whoever as long as a B/D principal approves it.  The defer to the B/D's NAV policy.  They couldn't care less if there is a commission or not.

Feb 19, 2010 9:24 am

I just don't know how stoked I'd be about making my money off my mom.

 
 
I guess if your mom is willing to give you 99k of her money to spread it over 56 fund families so you can pop the full commish, thats between you and her.
Feb 19, 2010 9:27 am

If you are old enough to hold a job, you should not be making money off of your parents. 

My parents are the only people who I absorb ticket charges for.  Unless your parents were total pr1cks, you owe them at least that much. 

Feb 19, 2010 9:34 am

If you are going to become an FA, you need to learn how to build your own business, not live off of your Mommy's money.  As a newbie, DO NOT make family members or friends your clients - you might end up losing both, as well as their money.

 
Your best bet would be to encourage your Mom to find a professional who will educate and work with her to meet her needs.  You can utilize this opportunity to get to know this FA to see if this line of work is something you would really be interested in.  Maybe they can even bring you on and sponsor your training/testing.  And, of course, if they won't hire you, you can have your Mom threaten to move her money elsewhere!
Feb 20, 2010 11:29 pm
Spud34:

If you are going to become an FA, you need to learn how to build your own business, not live off of your Mommy's money. As a newbie, DO NOT make family members or friends your clients - you might end up losing both, as well as their money.





At first, I had a problem with asking my family to be clients, but that feeling went away. It went away because I realized that they don't have industry knowledge to guide their finances, and I owe it to them to give free advice.



Now - friends are different. Friends are a great source of referrals; and I do charge them.

Feb 23, 2010 2:10 am

Where is everyone today???  Why hasn't this guy been ripped to shreds?  I can't believe how easy everyone is being on him.


As everyone else has said, if you do mutual funds your Mom will be eligible for NAV pricing (read: no commission for her to pay, and no commission for you) from many fund families.  If you aren't willing to do the right thing and offer that to her you have no business even thinking about being in this industry.

I'm not even sure if you get trails on family accounts, but for 1.6MM @ 25bps you could afford to pay your Mom $300/mo. to rent out her basement.

Feb 23, 2010 7:30 pm
CORR:
Spud34:

If you are going to become an FA, you need to learn how to build your own business, not live off of your Mommy's money.  As a newbie, DO NOT make family members or friends your clients - you might end up losing both, as well as their money.



At first, I had a problem with asking my family to be clients, but that feeling went away. It went away because I realized that they don't have industry knowledge to guide their finances, and I owe it to them to give free advice.

Now - friends are different. Friends are a great source of referrals; and I do charge them.


I have to agree with Spud.  When starting out, the worse thing you can do (almost) is to bring your family members and close friend's money under you.  When you are just starting out, how much "industry knowledge" do you really have - besides the older broker hanging over your head waiting to pounce on your accounts when you fail!  Once you have established yourself in the business, then you won't even need them - so it is a moot point.
 
Definitely use family and friends for referrals, though.  Even that shouldn't stop your cold calling/door knocking/cold walking/or whatever you prefer to do to.