Taking Over a 20 AUM EDJ Office

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Nov 27, 2008 10:32 pm

I am a "new" guy and have been told (but not in writing) that I am in line to take over a EDJ office with 20 AUM.

My questions, if you so choose to reply are these:

1.  Do you factor a 40% payout on the AUM?  I.E. how would you view an income stream for the first year.

2.  How typical is it for Jones mgmt to just "move people" out of a region - do they really have to screw up an office.

3.  Do you usually see an asset attrition rate of 70% (meaning that many assets go with the old rep)?

4.  Would you move 160 miles away, leave all your friends, with a wife and two kids to take over an office - and yes I am cut out for door-knocking, been in sales for 12 years (outside, inside, cold calling - just burned out on the industry I am in)

Your input, although you don't know me, is highly valued and I believe in "paying-it forward" - you never know when you are going to need some good advice.  What comes around goes around....thanks.

Nov 27, 2008 11:05 pm

need more info before you decide...

 
1. is it a competitive situation
2. how many fa's have worked this book prior to you?
3. do you want to live in the town where the office is?
Nov 27, 2008 11:07 pm
it's not a competitive situation
2.I believe 1 (2 max) fa prior
3. yes, we like the town
Nov 28, 2008 10:42 am
johnnybroadway:

I am a "new" guy and have been told (but not in writing) that I am in line to take over a EDJ office with 20 AUM.

My questions, if you so choose to reply are these:

1.  Do you factor a 40% payout on the AUM?  I.E. how would you view an income stream for the first year. - No.  AUM has no bearing on your payout.  Your payout comes from commission dollars.  So just because you take over a $20MM book doesn't mean you'll be making any commission dollars.  It's the clients you're interested in.  As far as your income stream goes, it could go really well if you work hard or you could make the minimum Jones will guarantee you if you sit on your butt and don't do anything. 

2.  How typical is it for Jones mgmt to just "move people" out of a region - do they really have to screw up an office. - There could be a number of reasons that office is empty.  If Jones fired the last FA it could have been from lack of production.  Or he could have sexually harrassed his BOA.  Or he could have signed one of his clients names on a document.  Plus a couple dozen other variations of the above.  Ask the RL why that person left. 

3.  Do you usually see an asset attrition rate of 70% (meaning that many assets go with the old rep)? - If it's a non competitive situation, like you said it was, then no.  You won't see much attrition at all.  If the other guy went to some other brokerage firm, then you can expect some attrition.  I wouldnt' guess 70%, but it could definitely be 50%. 

4.  Would you move 160 miles away, leave all your friends, with a wife and two kids to take over an office - and yes I am cut out for door-knocking, been in sales for 12 years (outside, inside, cold calling - just burned out on the industry I am in) - Live where you're happiest.  The open office can be a great kickstart, but it's not the golden ring.  You can still fail after taking over an office like that.  I'd get all the info I could before making a move like that.  With that said, if I were new/new again, looking to start a new career and someone offered me a 3-4 year headstart if I moved, I'd be packing my bags and my house would be on the market tomorrow. 

Your input, although you don't know me, is highly valued and I believe in "paying-it forward" - you never know when you are going to need some good advice.  What comes around goes around....thanks.

 
Feel free to PM me if you have any more specific questions.  I took over an office, albeit not that big, so I know some of the pitfalls for you to look out for. 
Nov 28, 2008 10:49 am

I would also find out what the assets look like:

 
$20 Million in bonds that aren't redeemable for 6-10 years and $20 million in mutual funds are two totally different things.
 
And like spiff, it seems to me that you don't know whether it is competitive or not..Definitely need to find out..Cause $20 can go to $6 or $8 real quick if somebody planned real smart to move
Nov 28, 2008 2:11 pm

Johny, the other thing to consider is, if it is a choice between this and opening your own EDJ office from scratch, it's a no-brainer - take it. If it's a choice between this and another job/firm/opportunity, then you need to do some additional homework. But if you do take it, no matter how good the assets and clients are, you still cannot survive on 20mm. You MUST focus on prospecting. It's imperitive that you fight the urge to just work the existing book. If you succomb to that urge, you will be back on this site 3 years from now, talking about how Jones lied to you, how they roped you into an office with "crappy" assets, how you can't succeed because they don't offer triple- short options on pork belly futures, etc. So here is your advanced warning....those assets WILL NOT sustain you. You MUST develop your own book. Those assets will simply keep you eating while you grow your own book. Trust me. Trust me. Trust me.

Nov 28, 2008 3:21 pm

First of all,

Congratulations! The chance to take over 20MM in any situation (competative vs non-competative, or how ever the assets are distrubuted) is a great opportunity. To answer the question, as far as income stream: the important thing  is how much you keep.  Then you can calculate about 20-40 bps (net) in comm off of that,  your salery, and with that level of assets, milestone bonuses fofr the first year and a half should be a no brainer. However, even if it is not competative, you could still loose half or more to other Jones FAs, so be carefull, also, be sure to continue to prospect or else you will run out of comm right as you run out of salery (this happened to me, and I can tell you that it is not pretty).
Good luck!
 
River
Nov 28, 2008 4:48 pm

Wow Ice,

Thank you...you have helped me beyond belief; I hope one day to be able to repay you in some small way. Your wisdom is as great as your magnanimous personality. Without that post, I would have continued to give horrible, horrible, advice for the rest of my life. You opened my eyes to a world of orthographic beauty. From now on, when I think of you, I will think of salary.
 
Thank you!
RiverPlate 
Dec 1, 2010 5:54 pm

Hello all. I just joined and am enjoying your posts!

So I am in a similar situation...

I have been approached about taking over a 25+ Mil AUM office. My question is this: how does this effect my goals and bonus structure...my salary?

As I understand it I basically get a new account bonus and others for the first two years... does this change if I take over an office like this?

Thanks for your help!

Kodak

Dec 3, 2010 4:30 pm

I didn't ask a no-no question, did I?

Dec 3, 2010 8:08 pm

Does anyone see the recurring theme? 20-25 million dollar offices open?? The new production standards are working.

Dec 4, 2010 10:42 am

The new production standards haven't started yet.  They take effect Jan 1.  Anyone leaving today is making a choice to leave because they believe it will be too difficult to raise their monthly production from $18K a month to $20K a month and then eventually $22K a month.  Instead of just figuring out how to gross an extra $2K (one LTC trade a month or an additional $50K in MFD sales) they figure it would be better to go to Ameriprise or MSSB or some variation of them and lose 30-40% of their existing book. 

Kodak - taking over an office does change your production standards.  At least it used to.  I don't know if it changes your bonus structure, but I wouldn't think it does.  Most of the new people in my region end up taking over an office and many of them hit their milestone bonuses.  If you end up taking over a $25 Million office, you really shouldn't have to worry about production standards.  The trails alone will probably keep you above the meeting expectations line for a while. 

Dec 4, 2010 1:54 pm

Thanks Spaceman,

Your help is greatly appreciated!

Kodak

For anyone who has experience taking over a branch, what is the best way to put the existing clients at ease?

Dec 5, 2010 3:22 pm

Hey Spaceman,

 I was a meeting Seg 4, the program started September selling month. And now my pay out is 90-93%. So if I sell that extra LTC I keep $1800. Oh yeh I can share an office with an accountant now....

Dec 5, 2010 6:58 pm

I saw that Jones lost another 100+ FA's in November.  They're dropping like flies now.

Dec 5, 2010 8:25 pm

100+ I think... No wonder they been pouding recruitment down our necks. An improving job market is going to make it tough for them to lock in job changers I suspect.

Dec 6, 2010 9:33 am

B24 wrote:  I saw that Jones lost another 100+ FA's in November.  They're dropping like flies now.

I understand less than 10% of those losses were bonus eligible.  What would be interesting is to know how long they were employed at Jones.  There's a difference between "not bonus eligible" at year 10 and year 3.  Looking a little deeper at the numbers would shed more light on the situation.

Dec 6, 2010 12:46 pm

Doesn't matter though.  Even if they were rookies, small producers, that's where the growth is.  If they are not adding brokers, they are not growing.  The bigger, veteran brokers produce the bulk of the income, but generally veterans do not grow their revenues very much.  How many $1mm producers from Jones grow their revenue 15%+ per year?  Take ten $100K 3rd-year producers at Jones, and they may grow their revenue 50%+ year-over-year. 

That's what most people don't get about Jones' model - they NEED new brokers in order to grow revenues.  Why do you think they are pushing Advisory Solutions so hard on veteran producers??  I can tell you it's NOT because it's the "best thing for the clients".  It's the only way to grow veterans' revenues.

Dec 6, 2010 1:12 pm

B - I think we are on the same page.  It doesn't mean a whole lot if Jones is losing dead weight (long term low-producers.)  It would hurt more if the losses are newer FAs whose revenue has been steadily climbing but are just not bonus eligible yet.  There is a huge difference those two demographics but Jones doesn't decipher between the two.  At least not to the masses.

Dec 6, 2010 3:26 pm

1) EDJ sucks badly!  I have no shortage of $350k-$500k EDJ brokers actually calling me back BEGGNG for jobs that I have no patience for newbies!

2) Get out now! good luck and may God bless you!

:)