[quote=B24]"But according to a Tiburon Strategic Advisor study, more than half of independent advisors report annual revenues of less than $250,000 per year. Clearly, there is a disconnection between advisors’ expectations of what they should be earning and what is actually coming in the door.
At least 95 of 100 advisors could tell me off the top of their head what their gross production was last year, but the same number would struggle mightily to tell me their net production. As an independent producer, you incur the same expenses as any other small business owner—office rent, supplies, assistants’ salaries and benefits—in addition to expenses specific to your profession, such as ticket charges for stock, bond and mutual fund transactions.
Average expenses for independent advisors typically range from 40% to 60% of gross production. Under that assumption, if your annual gross production last year was $250,000 and your total expenses were $125,000, your net revenue was $125,000. "
This sort of contradicts what I hear on this forum. Usually it's "oh yeah, my payout is 95% and I take home 80%". I am just curious where the disconnect is between a scientific study and rumor on a web forum. Not trying to be flippant, but it changes how you view independance to a degree.
This came from Financial-Planning.com.[/quote]
First of all, language like "typically range from 40% to 60%"
sounds like some guy's opinion vs. a statistically valid sample. Last year, I averaged about 32% overhead. This year, being down a bit on production and taking on some extra expenses by choice, I'm at about 39% overhead. Without question, I could run leaner and be at 25-30% overhead if I chose to, but being in the growth phase of my practice, I feel like I need to invest in it more. Certainly at higher production levels, I expect my overhead percentage to decline significantly. If I wanted to run the practice out of my house without an assistant, I see no reason why I couldn't keep overhead at 20% or less, but that's not the kind of practice I've chose to build. The overhead ratios I've referenced include about 13% straight to LPL for compliance, override/ticket charges, technology and E&O coverage. My payout starts the year at 90% and is now at 92% as I've gone past a couple of brackets. That covers most of my compliance and override charges. The remaining 5-6% comes from the other categories referenced.
I'm still relatively new to the independent transition (3+ years) and operating in a small, rural community, but I'm averaging more than $250,000 gross. My guess is that most advisors coming from a full-time advisor position with a regional, wirehouse or even a bank will average that number and more fairly quickly. You've probably got a significant number of part-timers by choice and HD Vest reps who spend 80% of their time being accountants mixed into that number. Also, if the survey group came from financial planners, there's a real possibility that those folks derive a significant portion of their revenues from planning fees, with commissions being an incidental part of their practice.
I didn't go independent for a big increase in payout...I went for the freedom. The fact that I have made far more money in years two and three than I was making as an employee is just icing on the cake. If you're going independent just to make more money, that usually doesn't happen overnight. Eventually, yes, you should certainly make more money and you'll even have something of value to sell or transfer to your children when you retire.
That's all true and accurate information...no bullshit. If you're decent at all and committed to running a full-time independent practice, there's no reason that you can't be grossing at least $300K and netting at least $180K within just a few short years. If you're Ron Carson or Ferris Bueller, the sky is the limit.