Statistics on Independence

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Oct 7, 2005 9:23 am

I found some interesting statistics within the archives of Registered Rep on working independently and thought I would share them for those who haven't seen them.


In the 6/01/04 issue it was reported that the avg net income after expenses for independent advisers was $135K, vs $185K at the wirehouses. It was claimed that "independent broker/dealer reps spent 40% of their time working on running their business rather than working on their book." http://registeredrep.com/mag/financeindie_existentialism/



In the 6/01/05 issue gross production stats were said to be $680K for wirehouses, $510K for regional firms, and $360K for independents.


http://registeredrep.com/mag/financepraise_pruning/




In the 3/01/03 issue rep turnover was 14 and 13 percent at regional and wirehouse firms, and 25 percent at independents.



http://thecbmgroup.com/publications/DistributionFinancial_P roducts/Okay,%20team,%20Listen%20up%20-%20Registered%20Rep%2 0-%20March2003.pdf#search='registered%20rep%20okay%20team%20 listen%20up%20cappon'



Advantages of being independent are setting one's own hours, not being pressured in a wirehouse culture, choosing a business focus as desired, etc.  A regional firm may offer these without the additional responsibilities of being independent.


When reading the views on an anonymous posting site it is good to regard the facts as well. The first article referenced above concludes by asking, "Is this an ego thing, or a business thing?" It seems to me to be a wise question.


Oct 7, 2005 9:35 am

“I can't imagine working for a big Wall Street firm,” says one independent rep affiliated with Edward Jones.


Now that's funny

Oct 7, 2005 9:44 am
newbankrep:

“I can't imagine working for a big Wall Street firm,” says one independent rep affiliated with Edward Jones.


Now that's funny



My guess would be that the big Wall Street firms can't imagine having an EDJ true believer working for them, either.

Oct 7, 2005 11:12 am
newbankrep:

“I can't imagine working for a big Wall Street firm,” says one independent rep affiliated with Edward Jones.


Now that's funny



It does make you wonder about the accuracy in other areas of an article that calls EJ brokers "independent"....

Oct 7, 2005 11:14 am

Interesting stuff, but as Samuel Clemens said: "There three kinds of lies: lies, damn lies and statistics."  By that I mean that statistics can be manipulated anyway you want (just like public opinion polls) to prove any preconceived notion.


It is true that there are business overhead costs, start up costs and on going tedious business activities that need to be taken care of in an independent practice that are generally not a concern for a wirehouse or captured rep.  These are very important points to consider. A prudent business woman  will have taken all of these into consideration before taking the leap of faith from captured agent to independent.  Each area of the country will have different costs.  For example my office lease is very inexpensive. So much so that I am embarrassed to tell you how much.


What the articles didn't do


1. Define what they mean by independent.  There are many models that exist.


2. Don't include insurance business.  I know, it is RRep so they can't conceive of the universe of life insurance, health insurance, disability, medicare sup plans  etc.  Those are a part of 'my' business model and are a very nice monthly income. The payout on those business activities is 100%


3. Make allowances for the cost variance from one part of the country to the other in terms of cost of living, wage scales and expectations.


4. What about the independent practice that includes not employees but several partners or associates each working a different aspect of the business.


You get the idea, I guess, that a calculator from RJFS or an article about independents in Chicago has no bearing on the guy or gal who wants to be indy in podunk America.

Oct 7, 2005 11:17 am
vega74:


Advantages of being independent are setting one's own hours, not being pressured in a wirehouse culture, choosing a business focus as desired, etc.  



Perhaps I'm just lucky, but I have all those "advantages at a wirehouse already. Does anyone here with an established book have a different situation?

Oct 7, 2005 11:19 am

Here's the part of the above mentioned article that caught my eye;


Independent advisors make up an estimated 40 percent of the brokerage workforce, but their ranks are thinning, if slowly. According to Boston-based Cerulli Associates, the current number of 96,484 indie advisors is expected to drop to 95,761 by 2006. The driving force behind this downward movement: Many reps are finding that the amount of time and money spent to keep a business going detracts from the satisfaction they derive from their jobs. They also are learning that autonomy is not a wholly positive state. It also carries with it enormous responsibility and rising financial costs.<?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

Oct 7, 2005 12:27 pm

The biggest issue is the ETC.  As an independent you own your book of business and if you want to retire, you can sell and sell to someone who you approve of.  This can give you some additional income in retirement over and above your own 401K.   When you retire from a wirehouse, you have no control on the successor to you business that you have spent years and years of your life to build.


On a touchy feely note, I care about my clients, some of whom have been with me for over a decade.  I want to be sure that they will be well treated after I pass on to a beach in Costa Rica

Oct 7, 2005 1:16 pm
babbling looney:

The biggest issue is the ETC.  As an independent you own your book of business and if you want to retire, you can sell and sell to someone who you approve of.  This can give you some additional income in retirement over and above your own 401K.   When you retire from a wirehouse, you have no control on the successor to you business that you have spent years and years of your life to build.



I don't know where people get that idea. I recently bought a book to suppliment my own, and in a wirehouse setting. Plenty of people I know have brought in their kids to their book to groom them to take over the business, or non-relatives as jr brokers to do the same.

Oct 7, 2005 1:38 pm
mikebutler222:
babbling looney:

The biggest issue is the ETC.  As an independent you own your book of business and if you want to retire, you can sell and sell to someone who you approve of.  This can give you some additional income in retirement over and above your own 401K.   When you retire from a wirehouse, you have no control on the successor to you business that you have spent years and years of your life to build.



I don't know where people get that idea. I recently bought a book to suppliment my own, and in a wirehouse setting. Plenty of people I know have brought in their kids to their book to groom them to take over the business, or non-relatives as jr brokers to do the same.



Since I can't edit my post, let me add to it.



On further consideration, one thing you probably couldn't do from a wirehouse is sell your book OUTSIDE the wirehouse. You'd have to leave your company, move the book and then sell it. The same sort of thing would apply if you wanted to buy a book from someone at another wirehouse. They wouldn't let that happen without a fight.


So, you make a good point that buying/selling isn't as easy at a wirehouse as it is for an indy.

Oct 7, 2005 1:58 pm

40% of your time on "business" rather than working my book?  Not even close.  I spend a few hours a month on that stuff and the staff people handle the rest.  Maybe these brokers had no assistants?


That survey seemed very generic and too generalized.  And as far as production goes--RJFS has more 3 million, 2 million and 1 million dollar producers than ed Jones does with about 1/3 of the total brokers. 

Oct 7, 2005 5:23 pm

I'll add that there are probably many independents that only do securities as a side business, i.e., all the CPAs with tax practices that work with B/D's like HDVest that don't have much in the way of minimum requirements and allow these folks to carry one with their full-time tax practices while making a nice side income selling mutual funds to tax clients.


Another point is that many indys are indy because they don't want the pressure and minimums set by wirehouses, so yes, you naturally get a lot of smaller producers that either couldn't cut it at the wirehouse, or didn't like the pressure they felt.  Mike, while you may not have sales pressure at you shop, I was contantly hounded for 20-25% production increases each year and frankly, I got sick of it...the money didn't matter anymore.  By choice, I probaly won't produce as much as an indy, but I'm confident that I'll take home as much, if not more.  I guarantee that I'll work LESS once the initial onslaught is over, as that was one of my motivations.  I like the daily routine, but not for 12 hours at a time and I'd like to take more time off in the summer when things settle down.


There's also a tendency for indys and Jones reps (I don't personally consider them truly indy, but that's a whole different subject) to establish in more thinly populated areas.  I can tell you with certainty that I have no wirehouses in my little burg, just me and the Jonsers and a couple of local banks.  Given the income and wealth demographics, it's not surprising that the wirehouses are not established here...it would pull their production averages down.


The bottom line is that for many indy reps, money is far from the primary motivator.  I saw a poll somewhere recently that showed in excess of 70% of advisors went indy for reasons other than money, so again, it's not surprising that the overall numbers are lower, given the other motivations for going independent.  There are plenty of Zackos and Rightways among the indy ranks, but there are plenty of me's also that just want to make a decent six-figure living without having management always asking for more.


Finally, I'll second Zacko's sentiments about the ease of running your own office.  I spend very little time on admin functions even as an indy.  If you are set up correctly and have a good assistant, there is no reason that you should be bogged down in the details of running an office.  Sure, there are plenty of brokers who couldn't run an independent office if they spent 80% of their time on it.  That's why there are different career paths in this industry.  Not everybody has the necessary skills to manage their own business, just like not all of us are natural-born salespeople.  For those reasons, there will always be the debate about which is better...wirehouse or indy...and the answer will never be clear because it depends upon the fit for each individual.


Sorry for the lengthy diatribe...I had a lot of thoughts on this subject and just kind of got on a roll...

Oct 7, 2005 5:59 pm

I brought an accountant in with me, so my admin duties are pretty much limited to dropping the bills on her desk, and writing a check once a month.  QED.

Oct 7, 2005 8:45 pm
newbankrep:

“I can't imagine working for a big Wall Street firm,” says one independent rep affiliated with Edward Jones.


Now that's funny



I guess the guy asking the question doesn't know that EJ doesn't have any independent reps and the EJ guy doesn't know he's not independent.  Two independently dumba$$ people!

Oct 7, 2005 10:04 pm

I work for Merrill, and I love it.  But I respect Indy's a
ton.  I really cannot understant the EDJ program at all.  I
got a recruiting letter from LPL and I saw a bunch of Jones people on a
list they provided of people that have moved to LPL in 2005. 
There were like 3 or 4 Merrill people out of like a list of 200, and 10
times that from Jones.  My pay-out is about the same as my Jones
buddy, yet he has less than a third of what I have in terms of tools
and resources.  I don't know- it just doesn't make sense to me.

Oct 7, 2005 10:14 pm

My bad, RW...had you crossed up with someone else I guess.  It's just that you sound so independent.


Keep up the good posts...yours are actually ones that I read...and mostly agree with...

Oct 8, 2005 12:24 am
rightway:

I work for Merrill, and I love it....  My pay-out is about the same as my Jones buddy, yet he has less than a third of what I have in terms of tools and resources.  I don't know- it just doesn't make sense to me.


Stop Drones!


Do not get excited yet!


rightway is being very gracious here.  Your payout is less, even before you branch overhead (i.e. postage & phone) than at Merrill.  Now that you have an annuity hypo tool and an eighth pref fund company, you probably do have about a third of what's avail at ML.


If anyone wants to really confuse a Jones broker, ask them what an Inv Policy Statement is.  The smart ones will tell you it is the inv objective indicated on a new acct form.  The rest will just stare at you like you are speaking a foreign language.


Actually, a third might be pushing it.

Oct 8, 2005 12:29 am
mikebutler222:
vega74:



Advantages of being independent are setting one's own hours, not being pressured in a wirehouse culture, choosing a business focus as desired, etc.  



Perhaps I'm just lucky, but I have all those "advantages at a wirehouse already. Does anyone here with an established book have a different situation?



I dont think you are lucky, I'm guessing you just produce.  When you're good at what you do, the firm leaves you alone.



Oct 8, 2005 9:03 am

If being independent is better, why is the number of them expected to drop, as indicated in the "Indie Existentialism" article? If being at a wirehouse is better, why do the regional firms score higher in the RR Broker Survey?

Oct 8, 2005 9:55 am

Wirehouse aint better.....I talk to many wirehouse reps who wish they were indy.  Half of them have contracts that they took for front money and cannot afford to leave.


As far as the number of brokers lessening in the indie channel--no way.  Perhaps the number of BD's may lessen as some of the smaller firms cannot be competitive nor can they keep up with the demands of regulators.