Advice on making a "jump"
I am 18 months in the business and would like to go independent.
The community where I currently have an EJ office is small and rental
costs would be minimal. My question is how much in assets do you
think I would need in order to make the jump? Current assets are
8M. I understand that may mean waiting before I move, but I would
like a goal to work towards. Would appreciate any input from
all. By the way am considering leaving Jones in order to pursue
fee based business.
To make a move to indy, my thoughts are the bogey you should set for is to have $18-20m in AUM. But considering that you are looking to transition into fees too, be conscious that the assets you gather have that potential. What I mean is, you don’t want to gather a lot of accounts that really are under $100k and expect to transition them to fees. You want to try and identify $7-10m of assets that can be transitioned and the clients are open to it. Upon the move to indy, you should really consider placing them into FEE based platforms as they move their account with you. Also, you want to go after your production when you move, not just assets - that is you’ll typically see that your 80% of your production is probably coming from roughly 20% of your clients - that’s who to target upon moving as well.
Thanks for the input. I would appreciate if any of you have any
examples of upfront costs and monthly costs (dont include rent please)
one can expect in an independent office. Again I understand there
are many variables involved, but I am just looking for a ballpark.
I wont give you any advie on AUM as I didnt have staggering numbers who I thought would follow from the bank to my indy office. However, two things I will offer up is that Ed Jones is not the same as indy. I am NOT bashing Jones, just saying its not the same as being out there totally on your own. I just went to an established indy office and its totally different from being at a nationally known entity. Joe just opened his own office so you may want to bend his ear.
The other thing to consider if you are really wanting to go indy and open you office is your OSJ situation. I have talked to several folks that forget about needing OSJ supervision if they are not taking the 24. Someone like LPL will provide OSJ support from the home office, but its expensive and works so much better when its local.
For me it wasnt about assets, it was more about having enough experience and knowing I could go do at LEAST $150K in first year production while putting my book back together again.
Sounds liek you’re doing alright, but you’re a bit early for the jump. If you were at five years and 30 million, I would tell you that you were definitely ready, but before that…it depends on your situation and your willpower…and ultimately, how loyal your clients are…
[quote=feebase?]Thanks for the input. I would appreciate if any of you have any examples of upfront costs and monthly costs (dont include rent please) one can expect in an independent office. Again I understand there are many variables involved, but I am just looking for a ballpark. [/quote]
Here's an expense estimator from RJFS' website that might help:
Once you narrow down who you'd consider, the recruiter for each firm should be able to run a proforma for you, giving an estimate of your net payout based on your gross & product mix and expenses. At least RJFS does that & I'd expect others do that also.
I wonder where they got these numbers.
The start up costs seem way high ($700 for a scanner!) and the monthly costs way low.
[quote=JCadieux]I wonder where they got these numbers.
The start up costs seem way high ($700 for a scanner!) and the monthly costs way low.
I wouldn't say the monthly costs are "way" low. A few items do look to be on the lower side, but not necessarily out of line for many areas of the country. The biggest variables are probably rent & staff costs, depending on location. But, this is just an estimating tool for the web. The recruiter can run a more precise proforma for a serious candidate based on actual situations.
FYI, the scanner is this case needs to be a type that'll work with RJ's document imaging system (if reps choose to use it). That's our system that allows us to scan and transmit paperwork directly into the back office system (rather than mail it). The scanned documents are automatically archived, directed to the particular department that needs it, tracked, and later available to any other department that may need them. We can also scan & store most of our compliance related documents, so we don't have to keep hard copy in our branch. A $100 scanner doesn't have the necessary technology to properly interface with the imaging system. Actually there's one for about $400 that'll do the trick; the $700 one is for high volume scanning and probably isn't necessary in most branches.
How much in aum did you take from the bank? I have about 25 mill aum, but 1/2 that came from the bank, the other half I brought in. I don't think I could take more than 50% but I do think I could take 3-5 mill in fee based which would give me a base salary of about 30-50k/yr. would this work?
I wouldn't recommend jumping, give yourself a couple hours to come down naturally. You'll thank me for this one. I know it all seems plausible that flight is possible, it just always ends up badly for those that actually try it. It has to do with gravity and the effect of a human body hitting the ground at a couple hundred miles per hour.
How much in aum did you take from the bank? I have about 25 mill aum, but 1/2 that came from the bank, the other half I brought in. I don't think I could take more than 50% but I do think I could take 3-5 mill in fee based which would give me a base salary of about 30-50k/yr. would this work?[/quote]
EZ, I know you asked Giff, but while you are waiting for his reply, I'll toss in my $0.02. First of all, don't completely discount the possibility of getting asset movement from bank accounts that you inherited, particularly if you've worked with those accounts at least 2-3 years and serviced them well. If you have interest in those accounts, you might focus your service efforts on those accounts that you would like to see follow you, and you may very well be pleasantly surprised at the loyalty they show you, even if they are not "home grown" clients.
My experience is that you'll have surprises on both sides of the equation...people will follow you that you did not expect to, and some of what you perceive as loyal clients will end up staying behind. My take on that is, if they did not think enough of you to follow you, good riddance.
I wish I could tell you that 3-5 million in fee-based equals 30-50K in "salary", but in reality, most of that will probably get chewed up in overhead unless you control expenses carefully, and even then, I would count on at least half of it going to overhead. My monthly overhead (which includes a part-time assistant) runs close to $4,000 and I think I am being fairly careful on cost control. Right now, I am coming up on $20 million with close to half of that in fee-based accounts and I pay myself very modestly (in the range of your "salary"), mostly because I am trying to get all my start up loans paid off by the end of six months (when the interest meter starts running.)
You may be just a bit short on AUM to make the jump just yet, but I'll never encourage a person to stay in a position where he/she is not happy. If you have a similarly discouraged co-worker that you get along with, you might consider the possibility of bailing together and sharing expenses for awhile to cut down the overhead.
Now, I'll let Giff have his turn, although my guess is, he's busy filling out ACAT forms and it may be awhile until you hear from him...
Thanks Indy. I appreciate the feedback. My thought is I would do this 12-15 mths down the road. I might operate out of an executive suite rental sharing with another FA before committing to fixed space. My only worry is getting clients in this day and age. I did it while with jones a few years back but it was tough. However the bigger payout, and owning my own business would motivate me.
Who are you indy with? Are they a pain to deal with in terms of compliance for seminars and mailers?
[quote=ezmoney]Thanks Indy. I appreciate the feedback. My thought is I would do this 12-15 mths down the road. I might operate out of an executive suite rental sharing with another FA before committing to fixed space. My only worry is getting clients in this day and age. I did it while with jones a few years back but it was tough. However the bigger payout, and owning my own business would motivate me.
Who are you indy with? Are they a pain to deal with in terms of compliance for seminars and mailers?[/quote]
Actually, I've found getting clients to be a bit easier as an independent. People have a level of respect for me that I don't believe I had working at a bank, so you may be surprised. As I told another new indy, the key is visibility in the community. Be visible & be involved...chamber meetings, service clubs, etc.
I am indy with LPL and am very satisfied. As far as compliance goes...aren't they all a pain in the a**?!!
how long you been indy, and what can I expect to make 1st year with about 12 mill aum, of which 4-5 mill is fee based? I appreciate the feedback. btw I hate the bank.
[quote=ezmoney]how long you been indy, and what can I expect to make 1st year with about 12 mill aum, of which 4-5 mill is fee based? I appreciate the feedback. btw I hate the bank.[/quote]
A lot of that info is in the Raymond James vs. LPL thread:
That details my search from part of the due diligence to the end of last year. As far as what you can expect to make, that depends a great deal on your velocity. The 4-5 million in fee based should yield you 80bps, assuming you charge 1%, which works out to 32-40K. The rest probably has a lower velocity but that depends largely on how active you are in your book. You could probably do 25-50 bps pretty easily, so assuming 7-8 mil on this part, you'd be looking at anywhere from 17.5-40K, so a guesstimate on 12 mil is anywhere from 50-80K/year. Beyond that, you will obviously be bringing in new assets and generating new commissions on those assets, so you'd tack that on to your total. your velocity on new assets will be anywhere from 1-5% (or more if you sell the good stuff like Dirk), so every new million should generate anywhere from 10-50K.
I went indy at the beginning of last August, so I am just about 6 months in, and have about 20 mil AUM. I left the bank with more than twice that, but only targeted 25 mil for various reasons. I am now at the point of not bothering with the last five mil I left that I considered worth chasing, as I feel like chasing new assets will be much more profitable at this point. Goal is to be at 30 mil by the end of this year.
BTW, I don't miss the bank bullsh*t either...most bankers will never understand our business or compensate it appropriately, and they love stupid pep sessions and pipeline reports and grrrrrrr...changing your comp structure each year. I got to where I just made sh*t up on my pipeline reports at the end so they'd leave me alone. I'm ten times more productive now without all the political bullsh*t I had to deal with.