Art of the deal

OTM, you can bet that there are some major strings firmly attached to the front money.  I'd try to do the deal without, asking instead for some marketing support, a dedicated sales assistant during your transition, etc.

I think I would, at this point, ask about the broker who left, and what, if anything, is left of the book.  Instead of coming right out and asking, you might ask "Why did the former broker leave?  I really don't want to make the same mistakes!" 

You typically would not get any clients, there is corporate policies on
how thos clients are distributed, and a new hire would not be part of
that.  There are always exceptions though. 



There used to be more room for negotiation, but many of them are more
canned now.  Something like 50% trailing 12 up front loan-5 year,
50% stock divied up in a 3 to 8 year vest.  Then you can get some
bonus in cash and stock if you exceed 12, 36 and 40 month
hurdles.  Hurdles based on production and/or revenue.  All
told, ou can get nearly 200% of trailing 12 if you really crush it, but
it is not likely. 



I would feel free to negotiate, but I wouldn,t expect alot of give and take.

As one who is offering the deals, if someone tries to get more upfront, they are running from something and I will not budge.  The only way that I would move is if someone wants to make it more back-end loaded.  Since you typically get a check up front and then a performance kicker after 12 or 24 months, ask to sweeten the deal by lowering the front and increasing the percentage on the back based on what you do. That lets me know that this candidate is looking to grow once they join my office.  Worst case, you get the same amount of deal.  Best case, you get lucky with some large new clients and your backend skyrockets.  Either way, you do not look like a check chaser.

Thanks for the info. I will take it under advisement.



1. So, if they give $ upfront in the form of a forgivable loan, and they structure it over a 5 year “forgiveness” period, I assume that you get a 1099 for 20% of this loan for the next 5 years. correct?



2. If you leave or get canned, I assume that they want their money back? And you are going to get a bill for this money you probably already spent? Would that be correct also?

[quote=onthemove]Thanks for the info. I will take it under advisement.

1. So, if they give $ upfront in the form of a forgivable loan, and they structure it over a 5 year "forgiveness" period, I assume that you get a 1099 for 20% of this loan for the next 5 years. correct?

2. If you leave or get canned, I assume that they want their money back? And you are going to get a bill for this money you probably already spent? Would that be correct also?[/quote]

1. yes....and the tax implications can be ugly, as well as the withholding...

2. yes.

[quote=onthemove]Thanks for the info. I will take it under advisement.

1. So, if they give $ upfront in the form of a forgivable loan, and they structure it over a 5 year "forgiveness" period, I assume that you get a 1099 for 20% of this loan for the next 5 years. correct?

2. If you leave or get canned, I assume that they want their money back? And you are going to get a bill for this money you probably already spent? Would that be correct also?[/quote]

What to expect when you move for front money:

Check in your pocket 30 to 60 days after your license transfers. License should tranfer within hours of arriving at the new office.

Expect your old firm to file a restraining order against you to stop you from contacting your clients. This has become less likely over the past year due to court rulings going against the firms. Yet, be prepared to spend some time on the beach. Make sure your new firm will cover all expenses of litigation. Normally not a problem.

Litigation or not, income wise, you're on the beach for at least a few months until your accounts tranfer and the fees/commissions start to roll in again. Use this time wisely ie prospecting

Taxes are the bain of the front deal. IRS regs require that firms withhold taxes from this money. Because it is a loan and not earned immediately the firms are permitted to give a check with no taxes withheld. However, because you start earning the bonus the day you start the firms will start withholding from month one. Some firms structure the first year as a 15 month deal that will allow them to hold back on the withholding until month 3. Withholding will be at the max tax bracket. Example: You structure a 5 year deal that gives you 150k up front. 30k is earned every year. Monthly withholding at 35% is $875. So every month your going to pay this amount in taxes. It's not a problem once production is up and running, you'll curse it if you have a bad month.

After 5 years if you decide to leave for another deal the firm will still try to enforce the contract, even though all financial liability has been satisfied. If you leave before the deal has run it's course the firm will come against you for the balance. Usually, the note is forgiven on an annual basis. Partial years don't count. Reality is everything is negotiable. Most firms will accept payment deals from departed reps. Best to pay them off with cash in full as you can settle for less than 100 cents on the dollar.

Negotiate everything right down to where you will sit. Money, how much and when, payout%, sales support, marketing dough, get it all in writing. If it's not in writing then it's not part of the deal.

As tempted as you'll be, try to break the age old tradition of spending any of your front on a high end car. The money will go soon enough, the depreciation on that BMW will be with you for years.