Retirement Packages?

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Dec 30, 2009 11:53 am

Can anyone give me a sense of what an FA retirement deal looks like at the major firms? Book multiple and time horizon for payout? Are guys putting together their own deals with advisors in the office or is the firm paying out over a certain term and then cutting up the book themselves?


Dec 30, 2009 8:11 pm

most majors have a structured deal and policy against "buying books" at UBS its paid over 5 years with a 25% advance. The total buyout is based on LOS, aum, % wrap business. you need to be teamed with someone at least a year and have 10yrs of service. you are considered an employee for the 1st 2 yrs which is pretty neat to get those last 401k matches social security / firm benefits quarters in.

It ranges from about 70% - 160%.

so a guy that is like 120% would get 25% day 1 (which is paid back by -5% over the 5 years) and then the other 95% is spread over the 5 yrs as a % of payout. higher the first years then declining the last few. (but its a % of the book so the guy taking over needs to make the book stay the same or grow) firm pays inheriting fa a bonus if book grows.

If you are a t a major firm ask your branch manager they will have a summary plan description.

Jan 4, 2010 10:50 am

Thanks for the response.

Can you help me understand this "get 25% day 1 (which is paid back by -5% over the 5 years)" - what do you mean paid back? Is it not the 25% upfront on day 1 and then the remaining 95% (assuming your 120% example) over 5 yrs on a declining grid? Is the book value locked on day 1 for the retiree or revalued each year for his payout?

Thanks again

Jan 4, 2010 1:57 pm

At Jones, you get paid out over 3-4 years.  Year one you get 75% of net (or 75% of gross paid at net commission rate).  Year 2 is 50%, year 3 is 25%, and year 4 is 10%.  It can be shorter if you have a small book, or didn't work at Jones very long.  The first 3 years, you are still technically "employed" and registered, and still receive full benefits.  They say you are supposed to work "in proportion to your % of the commissions", but from what I am told, you spend a few months transitioning your book to the new FA (who is not "new", but is new to your office - they must have minimum 3 years experience and be meeting production expectations in order to get the book) then basically stop working.  Year 4 is a 1099 "consultant fee" - you are no longer employed. 

It's not the richest package, but the nice part about the way they structure it, is that the first 3 years, you still get full benefits, plus your portion of the office profitability bonus (which can still be pretty good, since you are now splitting overhead costs with another FA).  But you also have a vested interest in the new FA doing well, as his production will dictate your residual income for the next 4 years.
Oh yeah, and you can still qualify for trips!
Incidentally, I have a friend that retired from Merrill about 4 years ago, and his package was about the same, structured a bit different, but worked out to be just a tad less lucrative than the Jones deal.  Actually, it sounds a lot like ABOM's package at UBS mentioend above.