Thinking of leaving Edward Jones for Morgan Stanley
I have been with Edward Jones for 15 years and produce over 750k per year. I am happy with Jones and feel I owe a lot to them but.... Morgan peaked my interest with a transfer package worth 330% of my trailing 12. That is a lot of money. I met with Morgan a couple of times so far and from what I can tell, I can do pretty much the same type of business there with an expanded platform. What am I not seeing? $2,475,000 question.
MSSB will own you for ~10 years. Go indy and keep ~70% of your GDC instead of 40% and you will make up the difference in no time.
Take it ; no way you could ever save $250m a year for 10 years even if the payout is low.
Try not to touch the check and buy munis with it and you'll be great...
That is an incredible offer. It has to have strings, but if you don't mind the strings, I would do it in a hurry. Congratulations.............that is something I would be very proud of.
Actually I wouldn't take it. Regardless, you're in a good spot. You most likely have a very comfortable life.
Assuming Jones has bumped you up to 50% payout, at 750k production, you're netting 375k per year.
Assuming this $2,475,000 is a forgiveable loan, and you invest it in bonds at 6%, thats 150k per year. Add that to your Morgan Stanley payout (assuming they'll payout 50%), of 375k net, you're now compensated $525k per year.
If you went indy at 90% payout, you'll be netting $675k per year. Assuming your expenses are less than $150k per year, you'll make more as indy.
A lot of assumptions but either way I imagine it would be hard to justify the check over the 90% payout. Either way you were offered to become a multi-millionaire, which is baller. Congrats.
I have a buddy that was recently approached by them as well. 300% of TTM, man, that sure is a ton of dough, wow. Of course, for a stock broker, that means someone owns you for 3x earnings.... If you go Indy, you don't get a check, no, instead you have equity. Not now, but in the future, what would a biz generating 500k per year, on say 80m in assets be worth in a competitive bid? 1m, 2m? Higher?
I've moved several times in my career. It is extremely disruptive to your biz, and personal life, and there is risk no matter what. "the money" is usually the motive that leads to trouble. And if you ever do go somewhere, for goodness sake, get it all in writing, and have an EXPERIENCED attorney help you out. Can't tell you how many times the handshake part of the deal goes sour.
I remember a RR article years ago about a rep that insisted on wearing cowboy boots to work, had it in the contract. After the merger, the new firm told him he could not wear them, but he just pointed at his contract.
Hmmm...I'd think it over....I wanna bet there are a few ex-Jonesies that went to MSSB who regret it.
Here's one of the other things to consider...and not just a move from Jones, but a move from anywhere to another wire (or any captive firm)...wherever you are, you know what you have....wherever you go is a big unknown.....
1. You don't know how much production will move with you. What if only 60% of your production moves? That may mean a smaller "move" bonus than you expected, and it may mean less net commissions. Put it together, and you may not come out THAT far ahead of where you would have been had you stayed where you were and not disrupted your business. Anytime you move, you lose that momentum, often for quite some time.
2. You have no idea of the culture, the players, and any changes that might take place (grid changes, product changes, etc.), even if you THINK you have seen the whole picture.
I think B24 is spot on. You need to find out what happens if you don't meet their hurdles. I had a buddy leave Jones for Morgan. He hated it. He said the culture is completely different and he couldn't stand it. Of course he didn't have a $2.4 mil check to sooth himself, but still. How long does the forgivable loan last? Is it worth $2.4 mil to be someplace for 10 years if you hate being there? I had a conversation with Morgan about 5 years ago and almost jumped because of the paycheck. Once I started looking at the math on what I actually had to take with me and the production I had to do to actually earn the upfront money, it just wasn't a sure enough thing to make me move. My guess is that there are some serious strings attached to that money. Perhaps it's kind of like the Godfather making you and offer you can't refuse.
I just don't see how Morgan and the other companies can make deals like that work. It takes them 5 years just to break even on that deal with you. Obviously more if you don't immediately keep your production at $750K.
You didn't tell us how old you are, but one thing I'd be thinking about is Jones GP. You're a top producer at Jones. If a guy like you isn't in line for some GP in the future, certainly you're in line for some large LP offerings. You give up that possibility up if you leave Jones.
He's 15 years in with 750K production - I am sure he has plenty of LP and has thought that through. But again, $2.4mm is nothing to sneeze at, but as you said, he will have to maintain that produciton to earn all of it. The risk is that he takes substantially less than he needs. To me, it's not about "leaving Jones", it's about the risk of anyone leaving to go to another firm. There is probably less "risk" if he goes independant, as the increased payout would probably offset any drop in production, and if plans to work at least 10 more years, he would likely come out ahead of the "big check" if he went indy versus taking the "big check". That does not even include the residual value of his business when he decides to retire.
As I suggested before, you really have to do a 10 year projection and look at the total net after 10 years, which would include an analysis of pay grids, bonuses, etc. The last thing you want to do is make a move just for the money, and find that you really didn't come out that far ahead. You would probably want it to be a significant 6 figure difference (at least) over 10 years in order to make a move, because you will be balancing this against the pain of moving. Now, if you really dislike where you are, that's completely different.
look it's this simple. you can either be an employee and get a check for ~2mm or you can be an employer that owns a business valued at ~2mm. If you need the money take the check but I would say if you need that kind of change it will only be a matter of time before you are back in the hole again.
Also, I am sure that check isn't all upfront. It is probably a max of 1mm upfront and the rest over 5 years based on hitting hurdles and if you don't hit them you don't get the backend cash.
Why are so many folks leaving MSSB right now? http://www.investmentnews.com/section/recruiting-moves
It seems to be a company that is on the downslope. Given the options of staying at Jones, going Indy or moving to MSSB with a nice check, the check seems least attractive. Those are some mighty heavy handcuffs they strap on you...
Why are you looking to begin with? Do you believe you can better serve your clients somewhere else?
Why do you think he is looking? Two point five fukin million for a practice of maybe 75mm AUM. It will make anyone look but unless he took over a big office and churned it, I would not take the check.
Honestly I can't think of a good reason to move except for the money. Now that I have had some time to think about it it is more clear. I have decided its not my time to move yet.
Funny, a friend of mine had the same question and he left. Took about the same check.
After 15 years, if it's not the time for you to go ... then it's never the time to go. When you compare Jones to working for ANYONE else, Jones wins ... unless you want money.
However, if you were comparing Jones to being independent ... not so fast. The "culture" is your culture. The office looks like the office you always wanted. If you go to someone like Cambridge or Commonwealth, you can have peers aplenty to speak to if that's your thing. And of course, the money is infinitely, definitely more.
All that LP earnings likely gets mitigated by the tax consequences of someone in your tax bracket. Here's some simple numbers, though: Let's assume you have an $80MM book of which you can transfer 75%, none of it in REITs. 10% reasonably could be assigned to that category. So that's $6MM that could be positioned into a commissionable product - yielding you over $400,000 in year one. You haven't done anything wrong. You've merely done asset allocation as it's done across the world. And you're an LLC.
But hey, if you can't create the culture you want, all that money is moot. Congratulations on the decision. It makes sense to me.
I think your open to moving for some reason other than the money (you may just not want to admit it right now). If you can increase your net by about 25%, that's $187k/yr. In about 12-13 yrs you have your 2.5mm but I'd guess it happens sooner than that because your business grows faster once you get a handle on the Indy life.
Plus you can shelter much more through owner based retirement plans than employee based plans, and you get your LP back as a cash cushion to go through the transition and maybe even invest in marketing the business (or doing a super tax shelter in one year and replacing the income with the LP cash).