Indy business model setup
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Can anyone comment on their experience, starting out Indy but working
out of the office of another Indy who is already established? Do you
have your own separate agreement with the B/D? Do you give up 10%, or
15% to the owner of the office and keep the rest, in return for an
office, support staff, and that person acting as your OSJ? If you
enter into an arrangement like this, how do you present this to your
clients - that is, does it get in the way of marketing your brand as an
independent business owner? And assuming this eliminates the rent, and
payroll (?), what do your startup costs look like, from leaving the
wire to the day you are in business?
If your going completely independent as a Registered Investment Advisor, some pays a bps fee on assets under management to the other RIA Firm as a form of compensation for office rent, staff and perhaps even marketing support. I’ve seen bps fees range from 5 to 20. It works a bit differently in the RIA world. Good luck to you.
Think I;m more interested in B.D affiliation with a B.D that has robust fee based platform.
I have worked in this situation as the OSJ. If the established indy is going to be providing you supervision, office space, support staff, and all other applicable expenses, then you need to be prepared to give up more like 30% or 40%, and this agreement is worked out between you and the other indy. 10% is the going rate just for supervision by an OSJ.
You would have a separate agreement with the broker/dealer and you can work under your own dba, but it may be in the best interest of your clients (to prevent confusion) if all reps in the office work under the same assumed name.
Startup costs will be minimal if the other indy is paying for rent and payroll. You will have to pay for your licenses to be transferred, state licenses, E&O insurance, and any other fees that the broker/dealer will charge you (i.e. software, email, administrative fee, marketing fee, due diligence fee - these all vary per broker/dealer).
I hope this helps you on making your decision. Feel free to send me a PM if you’d like more information.
Yes, you could operate under a separate agreement with the B/D or you could simply work under the other indy's OSJ. That would be up to the two of you. [quote=Sportsfreakbob]Do you give up 10%, or 15% to the owner of the office and keep the rest, in return for an office, support staff, and that person acting as your OSJ?[/quote] I would guess at least 10% just for the OSJ. Then there would be some expense-sharing beyond that number for space, equipment, utilities, support, etc. This could easily be another 10-20%, depending upon your production level. 10% for everything would be dirt cheap. I'd let someone provide infrastructure and OSJ supervision for 10-15% anytime they want to do that. [quote=Sportsfreakbob]If you enter into an arrangement like this, how do you present this to your clients - that is, does it get in the way of marketing your brand as an independent business owner?[/quote] It very much depends on how you structure the relationship. If you simply come in under the other guy's OSJ, you're probably presenting it as affiliating with an established independent practice that you share common values with. If you simply set up as a separate entity sharing space and staff, there's no reason you can't market your own brand, but if you do, you should get separate phone lines and have the staff trained to answer with your brand name. The level of separation is up to the parties involved, but about any level is available. [quote=Sportsfreakbob]And assuming this eliminates the rent, and payroll (?), what do your startup costs look like, from leaving the wire to the day you are in business? [/quote] The biggest expenses you'll have are (1) a nice computer system. I like a widescreen laptop that can be docked at the office and attached to a second large monitor that can be turned around to show to the client. (2) Nice office furniture. Your host may provide this, but I spent well in excess of $10,000 for nice furniture in my office. (3)Printing (letterhead, envelopes, business cards, signage etc. You can easily spend over a grand for this. (4)transfer fees. Typically, most clients like their transfer fees reimbursed, but I'd use your own judgement on that. (5) Advertising - You may have to spend some dollars blitzing the market to tell your clients where you are and persuade them to move over. (6) Accounting fees to set up your legal entity assuming you don't just operate under the other guy's banner. Those are the biggies that I can think of, although most assuredly I've forgotten something. It seems like yesterday, but this summer, I'll be four years into the process.Can anyone comment on their experience, starting out Indy but working out of the office of another Indy who is already established? Do you have your own separate agreement with the B/D?
Thanks all, very helpful.
Indy - looks llike setting up your own can pretty easily be done for $20k all in and thats probably more than needed.
Just to add a bit to indy’s comments-
At LPL is it entirely possible to use another OSJ and still operate under your own brand. But, if you are using his physical plant(and not just “off-site OSJ services”), it can send a mixed message if he has up lots of signage and you are operating under a different brand. Some OSJ’s operate under the LPL Financial branding for this reason-to facilitate recruiting.
As for furniture, I was able to get extremely high quality used furniture about a year ago from a mortgage bank that went out of business. I suspect if you keep an eye on the classified ads there are many more opportunities like this now. Used dealers charge a hefty markup, so better if you can find a liquidation sale. Maybe there is a Merrill branch near you that needs to get rid of a few extra desks! Don’t get too turned off by the idea of ‘used’ either. My desk is a huge solid wood piece and whlie you could tell it was not brand new it is in excellent condition and would cost thousands at original cost…I paid about 500 bucks. My 4 drawer fire resistent file cabinets were about 75 bucks each.
I would suggest your laptop or desktop is NOT a place where you try to save money. You’re going to be using it every single day and you need it to work well and be durable and reliable. I just bought my most recent one from a local ‘consultant’ who serves small businesses. It was custom-built without all the extra add-on software that usually comes on a new machine, and whenever I’ve needed a hand with something he’s a phone call away, and that’s been a big time saver.
If I could do it all over, I think I would make the ‘branding’ sacrifice to step into an existing OSJ for the first 18-24 months just so I could focus on moving my clients over and getting things up and running. Just my 2 cents, as they say.
Yes & no. it was for me because I didn't buy a copier, fax machine or any furniture for the lobby/reception are or my assistant. All that was provided with my rent. If you can find furniture at a liquidation sale or auction as was earlier suggested, you can save a ton of money. I paid full retail for my desk and almost 4 years later, it's got plenty of scratches and dings in it. It's still a nice desk, but it's definitely used. No sense paying for new if you can find something that looks good for 10 cents on the dollar. BTW...I love the office copier. It's tied into our network and I can scan high-speed to my computer in PDF format. This comes in handy as we are in the process of making our entire file system digital in PDF format. Other than time, this can be done very cheaply (much cheaper than LPL's ten cents a page for documents outside the basic application and forms that LPL needs. I image everything...statements, reviews (complete with my notes), tax returns...you name it. Anything new is imaged and automatically backed up rather than copied to create more and more paper. By this summer, I hope to have everything imaged. Some will argue that you can't access those files outside of the office...baloney. I have a drive that fits in my shirtpocket that's 120GB and when plugged into my computer via a USB port, automatically backs up all my files. If I'm at home and need file access, I just plug in the drive and have instant access to everything we've imaged. As I said...by summer, I intend to have all eight lateral file drawers imaged and on this tiny drive. If you're interested, it's called clickfree automatic backup and I picked it up recently at OfficeMax for $60. Thus far, I have 17 of the 120 GBs filled and it's copied everything on my computer, including all client files stored on our network server, so I expect to have plenty of room. By the time I run out, there will be something half the size with four times the storage capacity for $40...that's just the way technology works. Meanwhile, I have a very nice off-site storage mechanism that is every bit as secure, if not more so, that a locked file cabinet.Thanks all, very helpful.
Indy - looks llike setting up your own can pretty easily be done for $20k all in and thats probably more than needed.
[quote=Indyone][quote=Sportsfreakbob]
By this summer, I hope to have everything imaged. I intend to have all eight lateral file drawers imaged and on this tiny drive.[/quote]
Hey Indy,
Does your solution satisfy LPLs compliance requirements? I know I-Docs does, but like you said it's expensive.
[quote=etj4588] [quote=Indyone][quote=Sportsfreakbob]
By this summer, I hope to have everything imaged. I intend to have all eight lateral file drawers imaged and on this tiny drive.[/quote]
Hey Indy,
Does your solution satisfy LPLs compliance requirements? I know I-Docs does, but like you said it's expensive.[/quote] I don't know why it wouldn't be compliant... 1. It's on a network server and backed up offsite daily. 2. It's encrypted and password protected. 3. It's a hell of a lot more secure than paper files in locked file cabinets and they've passed on that. Frankly, I think it's a hell of a lot more secure than iDOC. I'll get my first audit on it next summer...until then, I'll be keeping all the paper files. Assuming all goes well, those paper files will then be shredded.
Cool. Our first audit will most likely come in November, so I’ll see how you do first. We lease a copier that copies, scans, and faxes. The scan function sends an image right to my desktop, so I can pretty much do the same stuff you are talking about.
Hey etj & Indy, could you share with us what model copier/scanner (and software) you are using?
thank youMine is a large Sharp high-speed copier with Sharpdesk software. It wouldn’t surprise me that etj has a Sharp copier from the sound of it…sounds very similar to what I have. I can stand at the copier and send a PDF of whatever I feed into the copier. Back at my computer, I then re-name the PDF and re-save it in a client file directory.
Actually, we lease a Canon ImageRunner 1023. I would guess its very similar to the Sharp. The software came with the copier.It wouldn’t surprise me that etj has a Sharp copier from the sound of it…sounds very similar to what I have.
My practice uses CEO Image -
Scans are done from a dedicated scanner, everything is then categorized in a specific client file, under a specific template and description, organized by date of scan, or date of the document. I know many people think scanning and saving the document is great, but if you can’t find the document in an efficient manner when you need it, it’s worthless. Additionally, when the SEC comes calling, how can you prove that nothing has been 1.) altered, 2.) moved, or 3.) saved to another individual’s computer system? The security of just scanning, labeling and forgetting about them is terrible.
I can find all ‘outgoing correspondence’ from 5/1/08 to 5/15/08 by the click of a button.
I can find all ‘discretionary client agreements’ with the click of a button.
I can find all documents that contain the word ‘TIAA-Cref’ with the click of a button.
Etc.
It should be secure, you should be able to tell who accessed the information last, and what they did with it? Did they print something? Did they move something? An open disc of information is pretty poor, in my mind.
CEO Image… they are great, their website is totally sucky, but they truly do a great job of setting everything up with your practice.
We went from 2, 4-place vertical files, to no more files, and 2 small folders with the client agreements, and original signatures that need to be retained for auditing purposes. Took us 30 days, start to finish, to scan and categorize everything. Each partner has access, admin has access, and two of us are admins.
Don’t focus on the scanner… focus on the system… it’s the cats ass.
C
C - how are you able to do these things with paper files? Your system sounds great, but for me and my budget, I still find a more limited password-protected system better than paper files...especially with an off-site backup. My guess is, that's better than what most of us are doing now.It should be secure, you should be able to tell who accessed the information last, and what they did with it? Did they print something? Did they move something? An open disc of information is pretty poor, in my mind.
C
I was speaking in terms of what an electronic system should have. We don’t have paper files, and I think the argument from many is that paper files 1.) suck, and 2.) are horribly insecure ways to store client information.
Sorry if I confused people… I think the electronic systems that exist today are great… I just believe that they need to be more secure than just scanning them to a hard drive.
C
Quick Question:
On the independent side how much does it cost you guys for health and related insurance coverage? Is there a group or association that you recommend joining to get better access to health insurance like the AICPA etc. Also, what I would expect to pay for family coverage. Currently with BC/BS and I would love to get it on my own before the jump. Assistance appreciated.$500 per month per partner/employee at my firm.
You might check with your local chamber for any group coverage that might be available.
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