Revenue generated from $1 mil asset

Sep 28, 2005 6:31 am

If I bring in $1 mil and put into an advisor account, at 125 basis points I get $12,500 per year.  Company gives me 40% payout so that's $5,000 left; the fed takes another 40% so that's $3,000 left -- seems so little reward for so much work!!

Is this the most that can be reasonably (as opposed to churning) generated from $1 million asset?

Sep 28, 2005 12:25 pm

That's correct. Let's see if I go out and get a salary job paying 75k and then after the gov't takes their tax there's only 45k left. It doesn't seem worth it. Come on !

You should be able to bring in at least 5 mill a year. That's yeary over year. Can you fiqure out how much you'd be making after 5 years, how about ten years. It's worth it. BTW the poor little worker bee might be getting 3% raises.

Sep 28, 2005 1:13 pm

Bluestar - Building a book of business in the manner which you describe, is extremely difficult. It's downright almost impossible. The lack of immediate gratification can sour your future efforts to  bring in accounts.......because it does not feel like there is anything in it for you........what's the point right????

You could probably grab $40,000 in gross off that same million, by doing a variety of transactions, but then that 1 million is not going to pay you much going forward, and now you really have to go out and get more!

It' like adding grains of sand to a jar, and can be overwhelmingly discouraging, but building an annuitized book at 1% will reward you down the road.

Sep 28, 2005 2:18 pm

Or you can go indy and get 85% of the gross and then subtract your

operating expenses.

Sep 28, 2005 3:17 pm

$40,000 gross from a mill? Wow, I am glad I am not your compliance offer.

Sep 28, 2005 3:33 pm

[quote=skeedaddy]Or you can go indy and get 85% of the gross and then subtract your
operating expenses. [/quote]

some indies are dillusional, there are many more opportunities at a wire that make up for the slightly lower payout.

Sep 28, 2005 3:35 pm

[quote=Guest1]$40,000 gross from a mill? Wow, I am glad I am not your compliance offer.[/quote]

why is that?

Sep 28, 2005 6:21 pm

I am a newbie to this industry and in my first full year of production.   I have brought in 5m in annuitized business which I get a 1.4% trail after 13 months.

I already have a head start in 2006 of approximately 70k in production from my trails alone.

I ran the #'s of bringing in 500k per month earning an aggregate of 6% annually and the numbers get very powerful if you can hang on for a few years.

Imagine the security of having 30M annuitized after five years or so which gives of a "salary" from the trails and lets you focus on continuing to strenghthen relationonships instead of worrying about gross all the time.

It's a win win win if you ask me.

Of course this business changes all the time so YMMV but my feeling this is the way to go.

Good Luck!

Sep 28, 2005 9:45 pm

Moneyadvisors, 4% is a LOT to expect to earn on an upfront basis on only a mill. I guess if you avoid breakpoints and charge 3 points on a bond (hey, even we aggregate bigger trades) you could do it. But I would not want my license riding on it. I invested 1.3 with a client today, some went managed, but the majority will be at a gross of around 1.5-1.6% with discounts, breakpoints etc…

Sep 28, 2005 10:13 pm

The beauty is that depending on the business model and the brokers specialty, money can be made on $1MM. Personally, our team would invest the majority, lets say 650K, in our managed money program, charging approx. 1.25-1.5%… We would leave approx. 100K in a VRDO interest bearing account, which would pay nearly nothing. The remainder may be invested in either closed end funds, mutual funds to fund some expected alpha, or VA’s to ensure retirement income and so on. The key is to balance the long term payouts with satisfying certain personal productions/ income goals in the short term. All the while, doing whats best for the client, of course.

Sep 29, 2005 4:09 am

Got got a client Monday who inherited almost 1 million from a relative

didn’t expect it.  She was actually solicited AT the funeral
home by the attorney’s son to buy annuities.  Since she’d never
had a dollar to invest before in her life, she bought.  Now she
can get out without taking a big hit and is looking to actually invest
money.  I looked over the information he gave her at signing, he
made over 4% on that $950k.  
Sep 29, 2005 4:56 am

OK, OK Maybe I should have said “you will not make 4% on a mill IF you are doing the right thing” I thought that may have been obvious.

Sep 29, 2005 12:42 pm

Guest -

I did not mean to start a debate on how 40k could be generated from 1 million, or compare ethics. I guess I just threw an example out there, on how a transactional or upfront commission might make you more, and is a little more immediately gratifying than plugging the whole thing to 1%. There are alot of ways to do it i guess. I personally am a 1% guy, but I was thinking......some people would put 500,000 in an annuity at 4.5 - there's $22,500, plus working with the $500,000 you could generate- $10,000, so ok maybe it's closer to $30,000. but, my point to the OP was that as tempting as it is to grab upfront PC's, annuitizing will pay off.

Sep 29, 2005 3:46 pm

I understand your point. I was not attacking you. I agree with another of you posts in that we are all working harder for less dollars than a few years back! (500k to an annity? YUCK, must be a bank J/K)

Sep 29, 2005 10:50 pm

There are a ton of different ways to bring home the bacon. Nice pickup there… Must love it when someone comes up to you with a million dollars to invest.

Sep 30, 2005 12:19 am

Why not put 500K into an annuity, especially if their liquid net worth exceeds 2 million plus and the annuity is the portion of their equity exposure.

Somebody who is 75 with four million dollars isn't worried about beating the S&P.  They want to earn interest income, preserve, and pass on.  They need some asset class diversification (from 1994 to 2004, 70/30 bond to stock allocation is less volitile than 100 bond, for example), but they might not want/like the equity markets. 

So why not insure that piece with a VA?

With a one million dollar portfolio, a $500,000 annuity at a 50/50 allocation is only 25% percent in equities overall, assuming the rest is in fixed income and with a smaller portion in some type of alternative asset classes (maybe a small piece in a REIT, like Beringer Harvard, paying 7% dividend monthly, or another hedging method for that matter) to further reduce correlation. 

So you got paid on a $500,000 annuity.  So what?  Isn't that why anyone is in business? 

Sep 30, 2005 4:35 am

[quote=Guest1]OK, OK Maybe I should have said "you will not make 4% on a mill IF you are doing the right thing" I thought that may have been obvious.[/quote]

A $800,000 in an annuity would pay 40k and you would have $200,000 left over for other things.  Nothing wrong with that, depending on the client's objectives. 

Now... sinking all their money into something unsuitable is a totally different story.  Or if a $1,000,000 client was generating $40,000 each year, that would probably be a problem as well.

Sep 30, 2005 1:38 pm

I'm in agreemnet with both Inconsults and Bank. I guess lately I have met a lot of resistance from clients the second the "A" word comes out of my mouth. So I have backed off presenting them. BTW there is a phenomonal article in favor of annuities in 9/28/05 WSJ. It's a shame that so many brokers have completely shoved people into annuities for so long, that now when there are some good annuity products out there, clients are scared of them.

Not to mention, you can take the upfront, or 2.25/.80 trail - not bad pay.

Sep 30, 2005 2:13 pm

Someone with 4 mill and 75 does not need a va, especially if you are putting in the money “to pass it on”. What your are doing is causing one heck of a headache for the heirs.  

Sep 30, 2005 2:16 pm

007 - Yes, suitabilty is a must!

Sep 30, 2005 2:35 pm

Jamesbond, it's not all about needs.  It is also about wants.  What if they want a guarantee that they will pass on at least $4,000,000?  What if they want to do this and still invest aggressively?

Sep 30, 2005 6:46 pm


Why not?  Equitable will let you pull of a guaranteed 6% off (it’s
not really a coupon as I disclose) dollar for dollar against from the
first year on without touching the annuitization base or the death
benefit.  Let’s say the market returns 0%.  Ok, even -2% or
so with all applicable fees.  The client can pull off that 6%
every year, for many years and virtually exhaust the contract, then die
and still pass $500,000 death benefit to his or her heirs. 

It’s a real headache to get an extra $500,000 inheritance.

Oct 1, 2005 1:51 am

except, the va will get hit with estate taxes the the beneficairy will have to pay, so the 500k suddenly becomes 200k. If the client want to “pass on money”, then they should buy life insurance. VA’s are NOT designed to pass on assets, they are designed to create a income flow. If you are selling VA as a vehicle to pass assets to heirs, it is highly inefficient.  

Oct 1, 2005 5:25 am

Jamesbond, You're right, The VA will get hit with estate taxes, but so what.  Do you know of an investment that they could make that wouldn't get hit with estate taxes?  I sure don't assuming that he wants to maintain control of his money.  (Except for a 529 plan if he lives for 3 years.)   

Is this person insurable?  If so, what if he wants to pass on the money, but still wants access to the cash if he changes his mind. best. 

I am not saying that this mythical person should buy a VA because we don't know anything about the situation.  However, I believe it is a huge mistake to rule it out without knowing all of the facts.   With the limited information, we could add plenty of facts that would make the VA a very suitable investment.

Example:  Client is uninsurable.  He wants to invest aggressively.  He also wants a guarantee that if he dies before touching the money, his family will get at least 4 million.  Is there a better solution than a VA?  I don't know of one.