Wirehouse Fee Schedules

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Dec 2, 2009 10:09 pm

Hi,

 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so excuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.
Dec 2, 2009 10:11 pm

1-3%

Dec 2, 2009 10:24 pm
badmove?:

1-3%

 
What are the breakpoints? is this for bond or stock accounts? Do yo know which firms are charging what?
 
thanks
Dec 2, 2009 11:27 pm
NEVER_proprietary:

Hi,

 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.



Do you run discretionary portfolios?  Are you independent or do you work at a wirehouse? 

If you are an indy and running non-discretionary portfolios, the ticket charges could really kill your margins (especially if your clients like to trade a lot). 

Also, do you plan to charge for holding cash?  Some wirehouses won't let you do that (or they cap the % cash position you're allowed to bill on). 

Dec 2, 2009 11:28 pm
iceco1d:

My firm is (basically), 1.5% up to 100K, 1.25% on the next 400K, 1% on the next 500K (so you're at $1MM at this point), and 80 bps on anything over $1MM.

Personally, I think anything higher than 1.5% is a rip off, especially if it's just for plain vanilla asset allocation, even if it's ETFs.  If you're using options, or managing individual securities and eating the ticket charges, then maybe 1.75% or 2% could be applicable for smaller accounts.

I think EDJ's most expensive fee, non discounted, for the smallest accounts, maxes out at 1.35%. 

I think fees in general are going to keep coming down. 

Also, keep in mind...you should NOT be presenting a wrap fee is a "fee in lieu of commission, in exchange for unlimited trades."  In a fee account, the fee is for your ADVICE, not for the product you are selling, or the transactions you're doing.

Good luck.

 
 
80bps for accounts over 1mm, is that the reps share or is that the total charge on the account? I've seen brinker, fundquest, curian capital fees and there is a total fee to the client and then the rep splits it with the fund/portfolio manager.
 
So charging clients 3% on 100k accounts for managing their individual securities is too much for most wirehouses?
 
I would charge a fee which would not include ticket charges. Most of my advice would be for individual securities. Fee for advice or fee for trades, at the end of the day what's the difference.......you're paying for something.
Dec 2, 2009 11:31 pm
NYCTrader:
NEVER_proprietary:

Hi,

 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.



Do you run discretionary portfolios?  Are you independent or do you work at a wirehouse? 

If you are an indy and running non-discretionary portfolios, the ticket charges could really kill your margins (especially if your clients like to trade a lot). 

Also, do you plan to charge for holding cash?  Some wirehouses won't let you do that (or they cap the % cash position you're allowed to bill on). 

 
I'm indy and non- discretionary at the moment but that will change as soon as I get the hang of fee based business. I will not charge to hold cash but I will have to double check with my firm to be 100% certain.
Dec 2, 2009 11:51 pm

Ok,

 
So how much does your firm charge as an advisory fee on accounts that are mostly geared towards individual securities trading?
Dec 3, 2009 12:11 am

Are you talking about a fee based investment advisory account or a fee based brokerage account that is client directed?

cause if it is the later... alot of wirehouses got into big troubles with regulators over those accounts. mainly old ladies paying $2k a year and do no transactions. UBS insight one.

Dec 3, 2009 12:25 am
NEVER_proprietary:

Hi,

 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.

 
You are mixing 2 types of accounts.......
 
Unlimited trades for a set fee - If the account is over 500K, you won't be competitive if you are over 1%...........If under that, I try to go with 1.5%......But, sometimes I need to do 1 or 1.25% to  be competitive.....
 
Managed Money - Putting the money with money managers......usually 100K minimum per manager (250K minimum for muni managers).......You can go from 1.5 to 3.....They usually keep around 1/3 of it and you get the rest to your grid......So, charge 1.5, give up .5 and keep 1%......
Dec 3, 2009 12:27 am
aeromaks:

Are you talking about a fee based investment advisory account or a fee based  brokerage account that is client directed?



cause if it is the later... alot of wirehouses got into big troubles with regulators over those accounts. mainly old ladies paying $2k a year and do no transactions.  UBS insight one.




 
The wirehouses changed the language in the contract to set it up as an advisory account.......So, the client is paying for the advice instead of the trades.....
 
That being said......I'm sure there are still potential problems if they are paying the fee and not doing any trades......
Dec 3, 2009 5:18 am

[/quote]

sfez:
 

 You are mixing 2 types of accounts.......
 
Unlimited trades for a set fee - If the account is over 500K, you won't be competitive if you are over 1%...........If under that, I try to go with 1.5%......But, sometimes I need to do 1 or 1.25% to  be competitive.....
 
Managed Money - Putting the money with money managers......usually 100K minimum per manager (250K minimum for muni managers).......You can go from 1.5 to 3.....They usually keep around 1/3 of it and you get the rest to your grid......So, charge 1.5, give up .5 and keep 1%......
 
 
  I guess what I'm describing is a managed account where I am the money manager too.
I don't want some other financial professional touching or dictating how and where to invest my clients funds. I would maintain the client/broker relationship and manage the money (on a non-discretionary basis while I'm just starting out) while charging a fee in return for this service/advice. I love managing money and this way I wouldn't have to give 1/3 of the fee away.
 
My managed account minimum would be 50k, if the client wants to test out my performance they are welcome to open a smaller commission based account and later convert to fee based when reaching the 50k mark.
 
Am I missing anything or is there any advice you could give?
 
Thank you
 
 
 
Dec 3, 2009 9:08 am

I know Raymond James has two options:

 
Passport:  Client pays a fee (negotiable) for ADVICE, but pays ticket charges ($30 for equities / $50 Fixed Income).  Acct Minimum:  $25,000
 
Ambassador:  Client pays a fee (negotiable but usually higher than Passport) for ADVICE.  If you are with RJFS, then the client gets 50 free trades a year (if they haven't changed this), then above that either the client pays the Passport schedule or the FA does.  If with RJA, the client has free trades with no limit (probably due to the higher cut the firm gets from those FAs compared to RJFS).
 
So this is doable, on a non-discretionary basis.  You don't have to get into the nuances of the Merrill Rule - just make sure that your clients are better off in a fee based account instead of a commission based account.
Dec 3, 2009 9:42 am

When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.

I think you might be a little confused.
Dec 3, 2009 9:57 am
B24:

When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.

I think you might be a little confused.
 
For the RJ platforms, they can be discretionary or non-discretionary - and it is unlimited trades (but I assume at somepoint the client would get kicked out if the level of trading is insane).  What happened with the Merrill Rule is that brokers were doing this, for a fee - which isn't allowed.  If you are an IAR, then you can in an advisory platform with an advisory arrangement.  When the Merrill Rule came down, RJ had to pay alot of money for doing this - so they have their T's crossed and I's dotted on this one.
Dec 3, 2009 10:05 am

From a client's perspective 1% to 2% is an acceptable range depending on size of account and strategies/services provided.

 
But that cost to client is different depending on platform.
 
2%, if trades, account fees, etc, are included is acceptable.
 
If they are not, probably 1.5% is the upper limit.
Dec 3, 2009 10:24 am
iceco1d:

My firm is (basically), 1.5% up to 100K, 1.25% on the next 400K, 1% on the next 500K (so you're at $1MM at this point), and 80 bps on anything over $1MM.

Personally, I think anything higher than 1.5% is a rip off, especially if it's just for plain vanilla asset allocation, even if it's ETFs.  If you're using options, or managing individual securities and eating the ticket charges, then maybe 1.75% or 2% could be applicable for smaller accounts.

I think EDJ's most expensive fee, non discounted, for the smallest accounts, maxes out at 1.35%. 

I think fees in general are going to keep coming down. 

Also, keep in mind...you should NOT be presenting a wrap fee is a "fee in lieu of commission, in exchange for unlimited trades."  In a fee account, the fee is for your ADVICE, not for the product you are selling, or the transactions you're doing.

Good luck.

 
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 
Dec 3, 2009 10:32 am
chief123:
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 
 
Slightly ontopic - how do you handle a client that wants to put a couple of positions in their managed account?  Is it a strict no or do you allow positions to be held below the line?
Dec 3, 2009 3:24 pm
B24:

When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.

I think you might be a little confused.
 
When I say unlimited trades it's meaning is dependent on the clients objectives and all trades are solicited. Some clients will buy a few funds and hold them for years others may trade the stock market weekly others may trade bonds quarterly...... All I'm saying is I want to charge a fee for my advice....my advice for each client will differ on their investments objectives.
Dec 3, 2009 4:03 pm
Wet_Blanket:
chief123:
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 
 
Slightly ontopic - how do you handle a client that wants to put a couple of positions in their managed account?  Is it a strict no or do you allow positions to be held below the line?
 
Current platform doesn't allow me to hold between the line...
 
What do you mean by clients want to put a couple of positions in their managed account? Do they want to buy something? Xfer something in? In most cases all security assets are part of the strategy so they get billed the same.
Dec 3, 2009 4:11 pm

There is the occasional client that wants to hold something that isn't in the investment model.  Drives me crazy from a compliance/liability perspective.