Smaller Firms

or Register to post new content in the forum

13 RepliesJump to last post

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
May 12, 2009 1:15 pm

First, please excuse my ignorance as I am trying to learn and understand this business (I am a banker and not a FA).   If I ask a “stupid question” I fully expect some posts pointing it out, but would like direction too.


 <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />


I am interested in a FA position and the RIA model sounds very appealing compared to traditionally practices.  I know that the wirehouses are on a hiring freeze and who knows when the training program will open up again.  I am hoping that boutique firms would be looking to bring on newbies.  My question is, as a general rule would these firms be inclined to sponsor, train and pay a salary, similar to a wirehouse?  Or are they just looking for experienced FA’s with a book and are already licensed?  I know each case is different.  I have over 12 years of banking experience, including sales and relationship building plus a finance degree. 


I’m expecting some to say, “who knows just go out and ask the firms”, but this is why I’m coming to you first.  To gain as much information as possible before I go out and talk with the managers and not ask stupid questions.  Also to understand as much as possible on what to expect.
May 12, 2009 2:39 pm

Honestly, it really will depend.  An established RIA is probably going be looking for one of a couple of things (depends on their structure and what they are trying to do):


1. A para-planner.  Someone that will develop financial plans for clients, but not necessarily be licensed or be the primary contact for clients.
2. A "prospector".  Likely someone with connections in the community (like....a former banker!), a lawyer, CPA, school principal/superintendant, community leader, etc.  Not someone who is cold-calling, but someone who is parlaying their contacts into clients.
3. Someone with a book of business (obviously) that they will essentially either "buy" or bring in as a partner, or bring in and just take an override from (i.e. they charge you a % of your production).
4. Client services person (bascially, an assistant that is the front-line contact)
 
Unless it is either a LARGE firm that is hiring new advisors to start out, or someone that is trying to expand their firm without a big financial outlay, the chances are rather slim.  But in those cases, I think only the former would pay you much of a salary (the latter could not afford to pay much unles they were aggressive about growth).
 
Here's a suggestion...go the websites of all the local RIA firms (doesn't even have to be local) you can find.  Look at the Bio's of the employees and see where you would see yourself fitting in.
May 12, 2009 4:58 pm
iceco1d:

Here's a question Swarley,

 
WHY do you say that the RIA model appeals to you the most?  Just curious if you are clear on what the RIA model actually is (and by the way, for the exams required to become an IAR of an RIA, you don't need sponsorship).
 

Ice,


 <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />

I find that providing financial and investment advice for a fee instead of potential bias advice to earn higher commissions is more in-line to my thought on how a financial advisor would/should operate.  To put the customers true needs first, that would benefit him and not to make a “quick buck”.  I like the idea of increasing along with the client when his assets increase due to advice I was able to offer.  I understand that there are sales involved, I still would have to get the clients in the door, but not a sales position to the extent that it’s a one time sell and no relationship is established.  I wouldn’t want to sell to a customer that one hot stock, because its commission rate is high.  I would like to genuinely help people with a financial plan that would help them live the way they hope for.  (Sounds cheesy, I know, but you asked.)
May 12, 2009 5:18 pm

You don't need to be an RIA to not sell the hot stock of the day.  I'm not an RIA and I do primarily fee-based investment accounts.  The key is to be able to put food on the table early on by being fee-based.  At 1% you'll need to bring in $10,000,000 of assets to net $100,000 of gross production, and at an 80% payout you'll bring in $80,000 of income before overhead costs (office space, compliance, supplies, an assistant to help out with servicing $20 mil of new money and clients, marketing materials, licenses, etc.).  After all that you may be able to eat lunch once or twice during that year.  Bringing in $10 mil in one year is not easy.  Of course you could sell a few annuities, REITs, or other products that generate commissions but are no cost to the client, but it sounds like you want ONLY fee-based offerings.

May 12, 2009 5:38 pm
3rdyrp2:

You don't need to be an RIA to not sell the hot stock of the day.  I'm not an RIA and I do primarily fee-based investment accounts.  The key is to be able to put food on the table early on by being fee-based.  At 1% you'll need to bring in $10,000,000 of assets to net $100,000 of gross production, and at an 80% payout you'll bring in $80,000 of income before overhead costs (office space, compliance, supplies, an assistant to help out with servicing $20 mil of new money and clients, marketing materials, licenses, etc.).  After all that you may be able to eat lunch once or twice during that year.  Bringing in $10 mil in one year is not easy.  Of course you could sell a few annuities, REITs, or other products that generate commissions but are no cost to the client, but it sounds like you want ONLY fee-based offerings.

 
Swarley, 3rdyrp2 is exactly right.  This is not a dig at you b/c you just don't know any better but this is the problem with the media and types like Suze Orman who talk their nonsense.  You don't have to be an RIA to give honest advice and not sell the hottest stock.  In theory, that RIA and doing ONLY fee based financial planning is great but that takes YEARS to build up a good enough book.  So when you give this client a fee based platform but you can't help them with their insurance stuff or any other immediate things like 529 plan that's not going to be fee based, that's revenue that's walking out the door and most likely going to get implemented somewhere else wrong or worse than that, not at all. 
 
I knew this one lady on my floor before and she was on this holier than though thing that I only want to do fee-only planning.  Guess where she's at now? Writing novels, lol. 
May 12, 2009 11:29 pm

I believe your understanding of the RIA model is a little simple Swarley.  I think ice was asking what do you know about the difference between RIA and normal indy firms.


You need to generate a little more detail about what you know.  Saying you just want to do fee-based business because you think it is more ethical is one thing (you can do fee-based business at a number of firms), but actually understanding the way an RIA works is another.
 
As for being able to make a living and eat doing it... the RIA is very flexible.  For instance, you can charge an upfront fee for developing a financial plan, and then bill against what you charged by charging your 1.5-2%.  This way you get something up front, but also gives your clients a break on the fees.  Some charge both (although this has to be disclosed on your ADV - or in your case the firm you are working for).
 
That said, the advice on here is really good.
May 13, 2009 9:23 am

I suppose I don’t really understand the difference between an RIA and a indy firm.  I was under the impression that only RIA’s can have a fee based business.


 <?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />


What are the differences between a RIA. Indy and wirehouse.  If you don’t need to be in a RIA firm to do fee based, then what advantages are there to being at such a firm?  Thank you so far for all of you help.  It is appreciated.

May 13, 2009 9:59 am

If you put up the numbers your company won't care how you run your practice, as long as its compliant.  At an indy you front the overhead expenses but get a much higher payout and probably more choices among product companies, at a wirehouse the company will front the overhead but take a much bigger cut of your production and you are limited to the product companies that the wirehouse chooses for their advisors.  I'm not 100% knowledgable about how RIA's work, hopefully someone could answer that better than me.

May 13, 2009 11:36 am

If you are doing fee-based business, then you are an IAR under a RIA.  Usually, you are working "under" the RIA which is a part of the firm.  If you own the RIA - then you are completely on your own.

May 13, 2009 1:09 pm

Thank you for all of the responses. 

 
Would you recommend getting training and my licenses through a bank, then after cutting my teeth, seek a position with a local indy / wirehouse, or go the local indy/wirehouse route first?  I have some savings, however I would need some income coming in right away.
May 13, 2009 9:55 pm
3rdyrp2:

If you put up the numbers your company won't care how you run your practice, as long as its compliant.  At an indy you front the overhead expenses but get a much higher payout and probably more choices among product companies, at a wirehouse the company will front the overhead but take a much bigger cut of your production and you are limited to the product companies that the wirehouse chooses for their advisors.  I'm not 100% knowledgable about how RIA's work, hopefully someone could answer that better than me.

 
3dryp2 is right about the payouts, products and support.  I will add that you can find a local indy OSJ where you won't have to pay any expenses except for technology and E&O and you're still getting awesome payouts.  I have a buddy of mine that just got with a local indy OSJ of one of the top 5 indy firms in revenue and he's getting a 80% payout for the first 6 months, then it drops down to 60% but can ratchet back up based on production.  On top of that, he's not paying a dime in expenses and his principal is even getting him a computer!!!
 
 
May 14, 2009 9:23 am

What is an OSJ?

May 14, 2009 10:12 am

Office of Supervisory Jurisdiciton...your Overlord!