AUM and Gross Commission

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Oct 8, 2009 9:31 am

I was running my numbers this morning and found that my AUM is actually up almost 25% this year, while my gross commission is up only 12%.  Has anyone run their figures YTD vs last year and if so are most of you up, down or the same?

 
Just trying to get a handle on how we are doing out here.
 
 
Oct 8, 2009 11:41 am

I am going to go out on a limb here and guess that most are in fact up, down, or the same.

Oct 8, 2009 6:26 pm

This sounds like Windy's cousin...but windy would be up 10,000% in assets and 10,000% in commissions

Oct 8, 2009 7:13 pm

I'd prefer assets up 12% and gross up 25% personally.

Oct 8, 2009 8:11 pm

from a branch stand point thats what im seeing (except rev is dn 12 not up 12) AUM is back but of course clients are out of the market as usual and missing the rebound.

Oct 8, 2009 9:54 pm

My AUM is up 20%. Gross production is about the same.

Oct 8, 2009 11:34 pm

I'm guessing that this is a common scenario given the bear market we just exited.  My assets are up a bunch, but my gross is actually slighty lower.  My business is very fee and trail-oriented (almost 70%) and thus, production often lags AUM.  The problem is amplified in an up market since my fees and trails from earlier this year were based on lower balances.  In addition, clients and prospects are still pretty gun-shy and unwilling to put new money to work given (1) recent history (2) stock market volatility and (3) low interest rates.

 
That being said, I just booked close to a record gross month and I will likely have my best year ever in 2010, so don't be surprised when your revenues start catching up with your AUM growth.
Oct 9, 2009 9:00 am

is everyone else down about 30% for revenue this year?

Oct 9, 2009 9:32 am

No.

Oct 9, 2009 9:38 am

bs

Oct 9, 2009 10:00 am
easy$$:

is everyone else down about 30% for revenue this year?




Yes, everyone is down.  The entire population.  Not a single increase in revs for anyone in the effin world.

Oct 9, 2009 10:38 am
Indyone:

I'm guessing that this is a common scenario given the bear market we just exited. My assets are up a bunch, but my gross is actually slighty lower. My business is very fee and trail-oriented (almost 70%) and thus, production often lags AUM. The problem is amplified in an up market since my fees and trails from earlier this year were based on lower balances. In addition, clients and prospects are still pretty gun-shy and unwilling to put new money to work given (1) recent history (2) stock market volatility and (3) low interest rates.



That being said, I just booked close to a record gross month and I will likely have my best year ever in 2010, so don't be surprised when your revenues start catching up with your AUM growth.





My business is similar, mostly fee.. How were you able to book a record month, have you switched to non-fee or just bring in more assets?

Oct 9, 2009 11:14 am

most reps assets are down and gross down also.

Oct 9, 2009 1:57 pm

Both up. A year ago i pounded the table about opportunities in the bond market. Perhaps you saw my posts entitled "Just Buy Bonds." Well, I followed my own advice. Now i'm trading out of some of those positions.  The advantage of having a simple business.

Oct 9, 2009 2:04 pm

I'm up on both counts as well.

Oct 9, 2009 2:10 pm

Down and Down.  :(  But to my admission, I've been quite a lazy self pittying cry baby most the year up until recently. 


But next year, they will be Up and Up. 


Oct 9, 2009 3:04 pm

Is easy$$ the same poster as the longtime member ez_money or whatever the name was?  He had the shark avatar as well.

Oct 9, 2009 5:48 pm

How about protection of principal with interest rates rising...Ice...You could have figured that out afterall you have an MBA in finance......

 
A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.
 
The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.
 
So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet?
Oct 9, 2009 6:32 pm
BigCheese:

How about protection of principal with interest rates rising...Ice...You could have figured that out afterall you have an MBA in finance......

 
A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.
 
The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.
 
So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet?
 
Again, ALL  of my bond clients are in it for the income. We are selling positions only when the profit and the replacement income add up to a higher number than sitting on the bonds. Kinda like selling out of a pre-re at a premium. There is no grand strategy. There is no trying to beat the market. Like i said-simple.
 
Go back to the early eighties when inflation shot rates straight up. The market gurus went on and on about how long term bond holders were getting crushed. They were talking about traders because long term buy and hold for the income types were getting exactly what they signed up for; a coupon payment once every six months.  And with rates moving up they didn't have to worry about an early call on the bonds. This made for easy income planning and a check they could count on. And, back in those days we're talking 7% tax free in a 50% tax rate world. On an equivalent yield basis, these clients were doing as well as treasury buyers at 14%.  For those with cash to spend we bought into the higher rates. And eventually all the bonds either matured at par or were called at, at least par if not a premium. Noone got crushed. All clients got everything that was promised to them even though the interest rate world as we knew it went beserk.
 
No need to buy any insurance/hedge/strategy. It's really simple: "This is how it works Mr. Client-when interest rates go up the value of your bonds go down. When interest rates go down the value of your bonds go up. Both will happen during your holding period. When and how much I can't tell you. Then again, neither can anyone else. This I can tell you. If you hold the bonds to maturity, you'll get every dime of your money back. That's because  a bond is a promissory note. It's a promise to pay. And, on that maturity date they will pay regardless of whether interest rates are up or down. Meantime, once every six months, until that happens, they'll send you a check. That's your tax free income. How does that sound to you?"
 
Bottom line- we don't worry about the market.
 
 
Oct 9, 2009 6:54 pm
BondGuy:
BigCheese:

How about protection of principal with interest rates rising...Ice...You could have figured that out afterall you have an MBA in finance......

 
A strategy that I used with a sizable client was to find a SMA who specializes in protecting values during periods where interest rates are or about to rise. Since they really have no where to go but up, Bondguy should be selling out to retain principal or even make a few bucks (which I am sure he is today). The SMA manager is RNC Genter, I am sure there are a others, Gannet Welsh and Kotler comes to mind, and during the period five years ago or so when we had 17 rate increases in 18 months the client had an overall return that was better than 5%.
 
The reason I remember this was the first position they bought was 150K US Treasury at 7.5% at 127. I thought the client was gonna have a coronary when he paid 190K for the 150k piece. Their strategy was to buy premium bonds and then trade them when strike points were hit. I can't argue with the results, but it wasn't easy to keep the client satisfied. I spent alot of time hand holding.
 
So Bondguy was right last year and he would be wise to take the profits and perhaps (god forbid) enter the market...because it looks pretty darn good for the next few years. Kind of reminds me of 1994. Ice, were you out of college yet?
 
Again, ALL  of my bond clients are in it for the income. We are selling positions only when the profit and the replacement income add up to a higher number than sitting on the bonds. Kinda like selling out of a pre-re at a premium. There is no grand strategy. There is no trying to beat the market. Like i said-simple.
 
Go back to the early eighties when inflation shot rates straight up. The market gurus went on and on about how long term bond holders were getting crushed. They were talking about traders because long term buy and hold for the income types were getting exactly what they signed up for; a coupon payment once every six months.  And with rates moving up they didn't have to worry about an early call on the bonds. This made for easy income planning and a check they could count on. And, back in those days we're talking 7% tax free in a 50% tax rate world. On an equivalent yield basis, these clients were doing as well as treasury buyers at 14%.  For those with cash to spend we bought into the higher rates. And eventually all the bonds either matured at par or were called at, at least par if not a premium. Noone got crushed. All clients got everything that was promised to them even though the interest rate world as we knew it went beserk.
 
No need to buy any insurance/hedge/strategy. It's really simple: "This is how it works Mr. Client-when interest rates go up the value of your bonds go down. When interest rates go down the value of your bonds go up. Both will happen during your holding period. When and how much I can't tell you. Then again, neither can anyone else. This I can tell you. If you hold the bonds to maturity, you'll get every dime of your money back. That's because  a bond is a promissory note. It's a promise to pay. And, on that maturity date they will pay regardless of whether interest rates are up or down. Meantime, once every six months, until that happens, they'll send you a check. That's your tax free income. How does that sound to you?"
 
Bottom line- we don't worry about the market.
 
 
 
DAMN!...It makes me want to start a bond business.  Nice post!  I have similar conversations with my Bond clients, although it is only a small part of my business.  I have recently been selling some of my longer positions for nice profits and replacing them with shorter term, higher interest, better quality issues.  It didn't last that long, but was very easy to do for a while there!