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What do you think of this payout grid?

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Apr 14, 2009 1:11 am

Hi all, as I mentioned in an earlier post, I’ve been charged with evaluating my firm’s payout grid. We’re considering the following:

Total Gross Production Product Less than $100,000 Less than $200,000 Less than $300,000 Less than $400,000 More than $400,000 Securities 70% 75% 80% 85% 90% Insurance 100% 100% 100% 100% 100% Annuities 100% 100% 100% 100% 100%
That's it: no equity, no bonuses, no red stapler; just the payout, adjusted quarterly in arrears.

I would greatly appreciate everyone's feedback - good, bad, and otherwise. Thanks in advance.
Apr 14, 2009 11:15 am

It has the advantage of simplicity.

One suggestion, level the payout % across Products or prepare for accusations in arbitration of advisor’s steering clients to high payout products. Since you (your firm) set up the conditions that led to the product selection you get to join the defense.

And Yes, I know that other forms have payout disparity, I also know there are a lot of firms that do not, everything goes through the same grid.

P.S. are you sure your firm can turn a profit at those levels? Grid doesn’t matter if the firm tanks.

Apr 14, 2009 11:26 am

Why are insurance and fixed annuities going through the grid?  

Apr 14, 2009 2:15 pm

Why are insurance and fixed annuities going through the grid?  

  General Agency commissions, I would presume.
Apr 14, 2009 5:07 pm

Thanks for the feedback. You’re right, the insurance and annuity commissions are GA.

I hadn’t thought about how it might look in an arbitration, but could be a big problem. Supposing there is a workaround to that, is the grid competitive relative to what you’re getting? What’s more important to you: higher payout or lots of bells and whistles (i.e., practice development, sales training, etc.)?


Apr 14, 2009 6:01 pm

I'd rather have the full insurance and annuity payout at 90%...not just the agent part at 100%.  I found that distinction out the hard way...

Other than that, it's not bad, but not quite what an indy at LPL gets.  What do your ticket charges look like?

Apr 14, 2009 8:15 pm

Icecold, our B/D ticket charges are:
* No-load MFs, ETFs = $35
* Load MFs = $0
* Stocks = $35 + $2/sh

Ticket charges on our fee-based platform are:
* MFs = $0
* Stocks, ETFs = $15

Other ongoing fees:
* $75 – Streetscape (optional)
* State registration fees (pass through actual cost)
* E&O insurance (pass through actual cost

That’s it, no monthly admin fees. I believe our ticket charges are a little higher than average, but it’s a pass through from our custodian.

Indyone, from LPL’s website, it looks like their payout on MFs, Insurance, and Annuities starts at 90% with an annual bonus that bumps it up to 98% for those producing > $4M. For General Securities, including fee-based accounts, the payout starts at 76.5% with an annual bonus that bumps it up to 83% if producing > $500K. So, assuming $500K in production, a rep would make 93% on Insurance and Annuities, and only 83% on Securities.

To play this scenario out further, assuming the rep was 50% Securities / 50% Insurance/Annuities, he would make $440K at LPL or $475K with us. Am I missing something?

Again, thanks for the feedback. Keep it coming.

Apr 14, 2009 9:14 pm

What about fees on the fee-based platform? For example I pay 15bps on my fee based business(just raised from 12bps).

Your stock trades are pretty crazy...$2/share PLUS $35.. I pay $16<2100share $14+.01/share on >2100shares
Apr 14, 2009 9:31 pm

Squash1, we don’t charge the rep any fees to use our fee-based platform, just the override as outlined in our grid. Just so I understand, you pay a 15bps fee to use your firm’s fee-based platform, plus whatever override they charge? Is that correct?

I agree with you on the ticket charges. Historically, that hasn’t been a big piece of this firm’s business (much more fee-based). I imagine we’ll start negotiating with our custodian once we have a few more reps online.

Apr 15, 2009 1:18 am

Correction: Our ticket charge for listed securities is $35 + $0.02 per share (not $2.00 per share as previously posted)

Apr 16, 2009 7:19 am

Thanks everybody for your help. We’re considering a few ideas about admin fees, but it likely won’t be higher than 8bps. 

Oct 28, 2011 7:51 pm

so does it mean that for lpl, admin fees are taken down before the payout goes to the grid?

and for the brokerage products, what are the actual advisor commissions charged to clients for $25k? $50K? $100K?

i hope someone can help me understand more on this part?