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Dec 13, 2008 1:11 am

I’m in my third year as a wirehouse rep, and am very strongly considering going independent.  Upon review of my book of business, I’m confident that I would leave with $7 million in fee-based business, with an ROA of 2.6%.  I have full discretion over all my accounts, and also trade covered calls, which generates extra income for my clients.  I would like to do more insurance and annuity business, but the payouts at the wirehouse are so low that it’s usually not worth my time.

I have a 6, 7, 63, and 65.  I don’t think I’m interested in becoming an RIA, but still would like the higher payouts and greater degree of independence that working for an RIA would give me.

Here is the situation on offer right now, from a company headquartered here:  The first $1100 per month goes to the RIA, as well as $1,000 a month for an office and computer with all the technology requisite to do my trades.  Registrations, insurance licensing, FedEx, extra postage (not statements, which are included), seminars–all those come out of my own pocket.  All payouts are 100%.  It seems like a no-brainer; the company is Harbor Financial Services. 
After a long telephone interview, the only concerns I have are on the tickets.  They clear through Raymond James, and the platform gives a client 50 free trades a year.  I trade a lot in the accounts; after the free 50, it’s $30 per trade.  He tells me they’ve begun a relationship with TD Ameritrade to charge 40 bp’s for unlimited trading in discretionary accounts, which will be up and running in February or March of next year.

Does anyone have any history with Harbor that suggests things aren’t
what they seem?  Here’s their website:  My only experience is in wirehouses, and I have no idea if this kind of arrangement is standard, or if I should look elsewhere.

Thanks, in advance, for all your help.

Dec 13, 2008 1:27 am

I’ve never heard of Harbor Financial, but it looks, at first blush, to be a different “packaging” of the traditional independent BD model. They want to present a “fixed” monthly fee (after “certain expenses”) after which you get a 100% payout, which is, obviously their "money-shot-line. The numbers appear to be very comparable to the @90+% payouts offered by other, more traditional indy firms. The part about all acocunts being held at RayJay is a little puzzling. Not sure what Harbor provides, if anything, that you couldn’t get by going directly to RayJay (or LPL, or Royal Alliance, or any number of others)?

Dec 13, 2008 1:46 am

Upon reflection, I’ll do this before someone else does and I’ll try to be nicer: You claim to be a third year wirehouse FC who could take $7 mil. in fee-based assets, on which you’ve been given full trading discretion (assumedly approved by your firm) and charge annual fees averaging 2.6% (also, assumedly approved by your firm)? Your story doesn’t even come close to passing the smell test. Sorry.

Dec 13, 2008 2:03 am

Apology accepted.  On my covered-write accounts, I charge the firm maximum of 3%.

There are two discretionary platforms at my firm.  For both, the maximum annual fee is 3.  The difference is one requires that the asset allocation remain within certain parameters (minimum number of positions, maximum amt of cash, no leverage) ; the other doesn’t have any limitations whatsoever, but requires at least $50 AUM and 10 years experience in portfolio management.

Dec 13, 2008 2:06 am

May I ask at which wirehouse you are employed?

Dec 13, 2008 2:13 am

Smith Barney.

Dec 13, 2008 2:24 am

IMHO, it will be very difficult to successfully transition to any indy platform with only $7 mil AUM (having done it with many times that amount of AUM). That said, I believe that what I’ve seen about Harbor, vs, the traditional indy BD’s is that they are probably very similar in the take-home-pay department. Good luck!

Dec 13, 2008 2:32 am

I’ve got more, I just don’t want to move over dead assets.  This is a good chance for me to cull my book of the accounts I inherited that are nothing but trouble, and where I get such little gross from them.
I’ll finish 2008 with 165k gross, which at SB is like the pimple on a frog.  Though with markets the way they are, there are a whole lot of $1mm fee-based guys who are going to be doing about half that in '09, unless we get an enormous rally.  Fast.
Appreciate your input.  Thanx much.

Dec 13, 2008 5:13 am

I came over to indy with $4million and had to xfer it all into fee based(not available at EDJ)… But I busted my rear and did new prospecting I hadn’t used before(cold calling and seminars) and not I am doing fine. I think the myth that you have to have $30 million in assets to go indy is only if you don’t make an effort to add assets like a new guy.

Dec 13, 2008 1:16 pm

Thanks Chief.

Dec 13, 2008 5:05 pm

Those numbers seem high. Well i guess depending on where you are.

So he gives $1100 for some reason?

and then another $1000 for office and computer

Plus extras?

Dec 13, 2008 5:48 pm


 That $2500/mo fixed figure is WAY off. You forgot E&I insurance, state licenses, ticket charges, advertising, office supplies, etc., plus, I didn’t read anywhere that the $1000/mo office/computer/technology figure included anything like a receptionist. It just doesn’t jibe, to boot. $2500/mo in expenses then a 100% payout just does not compute. My bet is that, over a year, that $2500 turns out to be more like $4000.00.

Dec 13, 2008 9:55 pm

The $1100 a month is for the RIA.  Ticket charges are $30 per trade, but with 50 free with each managed account per year.  And in February, I’ve been told that clearing will be done at TD Ameritrade for a fixed 50-bp fee per year–something I’ll believe when I see, but the other indy firm I’m looking at uses TDA as their custodian, and that’s the fee there.
The $1000 is for use of an office, phone, fax, and a (hopefully) nice lady answering the phone.  Advertising, license fees, office supplies are out of pocket.  My clients are in FL, AL, MS, LA, TX, VA, MI, and GA, and most are below $100; Texas is $400.   E&O is $1200/year.

The reason I’m able to get an office at all is because it happens to be co-located with the OSJ of the firm itself.   They have 12 employees, and only one producer at their office here, with other vacant offices they’re hoping to fill.  Obviously, were I affiliated with the firm but in another city, I would be on the hook for whatever office expenses I would incur acting on my own.

Dec 13, 2008 9:56 pm

Excuse me–but I still haven’t decided yet.  So the above post should have been written in the subjunctive.  "The reason I WOULD BE able to get an office . . . "

Dec 13, 2008 9:59 pm

And the office is optional.  I could work out of my home, should I prefer to.  But the clients I’ve got are used to seeing me in an actual office with an actual desk and an actual window with a view of something besides my neighbor’s pool.  Plus, I’m a social person.  I frankly don’t have the work ethic at home that I do when I put on a suit and interact with other human beings.

Dec 14, 2008 2:28 pm


This shouldn’t be that complicated to assess.  Just run the numbers on your specific book.  Project your revenues and your expenses, both at current business levels and +/- 25% or so to see exactly how that impacts the results.  Compare your net in those scenarios as a percentage of your gross to your current situation, and you’ll know how much of an improvement you could expect.

Only you have all that information.  Put it to good use.

Dec 14, 2008 10:26 pm


I don't think it's that far off.    $1100 'rent' $1000 'fixed override to the RIA itself' _______________________________ $2,100   My E&O coverage costs about $90/month.  So call it $100 per month, nice round figure.  Suppose he needs to be registered in 12 states @ $100 per state, per year (which that's probably steep), on average $100 a month.    That takes the total to $2,300/month.  Trading is free as long as it's less than 50 per year, per account (in my practice, that would cover it pretty easily!).    It looks like he gets the use of the telephone/internet/conference room and other shared facilities and services of the office included with his 'rent' payment.  So he has $200/month to buy some printer paper, keep his computer up to date, and buy business cards & pens with.  I think he should be able to manage with $2,500 in fixed costs.   Advertising isn't a fixed costs.  He doesn't have to run newspaper ads, or do seminars.  He can pick up the phone or go for a walk for free.  That's not a fixed cost.  [/quote]     Ice, your E&O is really $90/month?  I think I'm paying like $250/month for the first 6 months of the year.  I guess it's not that huge of a difference.   FWIW, we spent about $600 for 2000 business cards, 1500 sheets of letterhead, and 10 notepads.  That lasts about a year or a little longer.   I think we spent another $500 in envelopes, business sized, business reply envelopes, and oversized 12"x9" envelopes.  We haven't had to re-buy the envelopes in 2 years and still have plenty left.
Dec 14, 2008 11:38 pm

Let’s just say this…

If you need to count pennies in order to make this decision, don’t do it.


Dec 14, 2008 11:49 pm

Fair enough, ice. I guess I would question what kind of all-inclusive office space (with receptionist, phone, data, fax, utilities, etc.) one can get for $1000/mo. I can tell you that, in my area, it would get about a 10’ x 12’, windowless room in a  20 year old, run-down hovel. Beyond that, I can’t honestly see building a legitimate business presence without ANY advertising budget. Could you pound out a living? Maybe. Could you build a real, valuable brand. No. I guess some guys put a premium on bare-bones office and operating expenses. I chose to make my presence a notch (or two, or three, honestly) higher than it was at AGE. i have a new, huge, custom built-out office with room for expansion, top-end phone, data, wireless, etc. and my total overhead is about $3500, including my O&E, and health insurance, and receptionist. On top of  that, I give LPL 8% of my gross. I can’t really see a more efficient model, and I looked all over.

Dec 15, 2008 12:48 am

Point well taken. If that deal is legit at @$2500/mo in total expenses, followed by 100% payout, it is a PHENOMENAL deal. Almost too, phenomenal, if you catch my drift…
 I just can’t see an RIA taking on a broker for a flat $1100/mo cut, not to even mention the rent.