From Jones to Fee Based
I'd like to ask those that left Jones to go independent - how long did it take before you began doing fee based practice? Coming from Jones where fee-based is the devil, how did you make that switch? Or had you always felt at the back of your mind that there wasn't anything wrong with fee based and it was an easy transition.
We know there is alot of money to be made, and we also know that fee based can be a better practice in some situations for some cients...soooo just curious.
It took me a couple years to really find my nich in the fee based area after I left EDJ. So it was pretty slow at first. After being with Jones for about four years I knew I wanted to go with fees and I made the leap at six years.
It took me awhile to figure out whether I wanted to use 3rd party managers or discretionary accounts. At first I went with 3rd party mgrs but that didnt suit me well so then I switched to discretionary. That is when everything took off. I also have a fair amount of 1% trails now from annuities which is great.
I don't think it is as easy as some people think to make the change. If I could do it over I would have left EDJ earlier though and got started sooner. I am about 68% fee based now and it is a joy to run the business. In some respects I work harder because I do everything myself but my stress has dropped way down because I have a good idea what my income is going to be month to month. I also work fewer hours.
I highly recommend it to any clone that is reading this!
I made this as part of my transition. Meaning, I targeted some clients and a portion of my assets for fees as I moved over to indy.
I also made the decision to make the change when I left. It is more difficult but its worth it. I recommend a disk by Bill Bachrach called Old World New World to aide you in your discussion with the clients to help them understand the benefits of your new approach. I’m convinced that is better for the client no matter what you hear to the contrary by Edward Jones. I felt like a product pusher. Have you seen the amount of money from reveneue sharing lately??
I transitioned my book almost instantly. I transferred the clients accounts in kind and then about 3 months later when the dust settled I had a portfolio review and mentioned they needed a little International, Small Cap, Mid Cap, etc. Because at Jones everything was in Large Cap Value. I told them that we were not bound to commissions anymore and we could pay a fee going forward. Or I said, you can continue to pay commissions. Bottom line is we need to diversify your assetts and it’s your choice, fees or commissions. They always chose the fee.
I did not go Indy, but I went from largely commissions in a bank to
totally fee based with ML. When you factor the transition package
I did not loose 1 penny in annual income. I spent basically the
1st year transferring clients to a fee based platform, with about 20%
of that time prospecting. I transferred about 80% of my target,
and about 30% of my former book. Then in years 2-4 (my salary
dropped off and the fees kicked in) I spent about 50/50 between
prospecting and servicing. This is where things exploded. I
doubled my book by year 5, which took me over 100mil. Then I got
too busy, formed a team (some of you may remember my posts questioning
about teaming), and we experienced another explosion.
Indy is very different because I was getting paid on business lending,
mortgages/HELOCs, Investment Banking, all sorts of cool stuff. I
also had the transition package that involved outright salary
plus production…they don’t do that anymore and its not a
possibility going Indy (I don’t think anyway).
I say all of this because moving to a fee based business (which is not
C shares in my opinion) was the single best thing I ever did. Had
I not left the commission business I would be burned out by now.
After reading your post--I realize I'm going to have to get back to work. What % of your book is in fee based now? How long did it take you? I have about 115 million AUM (just me and a couple of assistants) and about 350-400 HH's. Did you meet with each client and say..this is how and why I am changing how I do business.....or did you approach it a little softer?
I'll leave my 19 million in C shares alone for now though.