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Indy Options for My Situation?

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Nov 12, 2009 4:32 am

Currently with a wire and quite frankly see myself leaving within a year, especially with the low payouts for smaller producers and decreased payouts on small HH. Here are my #'s:

  15MM assets / 100K Recurring Revenue / T12 190K Mostly building fee-based assets, with occasional annuities Average HH size about 250K-300K Focused on Retirment planning and building recurring rev / bonds /mutual funds / ETF's / not much indiv. stock picking   From these options below, can you share with me considering my above situation, what firms would be interested in looking at and what ones should I stay away from.  I've heard bits and pieces from most of them but would like to eliminate any if you guys have some experience already with them.   LPL Cantella Harbor Financial Securities America ICA Commonwealth First Allied Cambridge Investment Research Capital Financial Group/HBeck   I'm looking for the most cost-efficient transition; meaning I don't have a ton of cash for start-up expenses. So I'm not sure if joining an existing B/D in an office with an existing BOM would be best OR could I start-up with limited funds on my own.   Thanks      
Nov 12, 2009 4:40 am

You can probly go RIA. Consider talkign to fred at TradePMR.

Nov 12, 2009 10:40 am

Thanks aeromaks!  Prime09 -- you've listed some good firms for sure.  I'd be happy to speak with you regarding my own experiences to help.  Please feel free to ring me up to discuss.  888-579-8640. 

Whatever you do, all the very best to you and your clients.

Nov 12, 2009 3:07 pm

Start saving what you can now and make the change ASAP.  Your business is solid for an Indy model.  You don’t need an assistant.  Just find where some 300-500 square foot office suite to rent and get to it.  With those assets, even if you move only take 10mm with and its fee based, you’re making as much or more than you are now.  If you join an office, they’ll rape you on overrides to cover your “portion” of rent, phones, equipement, etc that are really not all that much.  Depending on which Indy firm you’re looking at, either get your S24 to be your own OSJ or find someone that will do it for 5-10%.  At an ~80% payout, it wont take long for your cash flow to be pretty solid and higher than it currently is. 

  As for the b/d's you listed, I can only give opinions on one, LPL.  They have great technology, research, and business building resources.   I think this is an area LPL provide much more to their reps than the average Indy b/d and in my short time with them, they seem pretty close to being at a wire but still being independent.  I think most all b/d's fee's are going to be reletively similar.  LPL also has a wide range of advisory platforms which you would like as you are mostly fee based.  Worth looking into further. 
Nov 13, 2009 12:57 am

I disagree that all firms will have similar fees.  They may have similar payouts and it amy look similar on the surface but it is the nickle and dimes that will get you. The average BD will payout 90% (maybe 80 to you and the remaining 10 to an OSJ or home office supervisor). A 10 % gross margin barely makes a penny for the BD.  They make there real money by marking up ticket charges, E&O, tech, conference dollars from reps and sponsors, marketing dollars (hence the preferred provder list), margin and money market rev share with the clearing firm, proprietary products and the lsit goes on.  If you are mostly fee based they may mark up a platform fee.  If you charge a 1% fee and the paltform fee is 30 bps with no ticket charges then you may get 90% of 70% or net 63%. With a 20bps platform fee you net 72%.  That is a big difference!  Also do they calculate your payout before or after ticket charges are deducted?  That is another game that is played.  On the surface it may look the same but they can get another 5% out of you.  I know this because I used to make the rules to this game at a BD. Fair is E&O at 150-175/month, ticket charges 10-15mf, 20-25 all else, basic tech(no real time) 25/month.  Everything else should be a la carte.  Some may throw in freebies such as Forefield or laserapp or basic FP software.  I personally dont like big indys because they are like a wirehouse.  i would look at some smaller BDs just to make sure its the right move.  At 190 you will be just another #.

Nov 13, 2009 2:38 am

What type of fee program do you run? Wrapped funds, discretionary trading, Seperate Accounts? That will make a big difference…

  Cobia is right. Each indy b/d has its own markups, just know what they are and what you will use..   Some b/ds now have a fixed monthly fee instead of payout%.   Again explain a little more about your assets in fee program.. can give you a little more guidance.
Nov 13, 2009 5:03 am

I agree 100% with Cobia.  I tend to favor small B/Ds in general, but especially at your production level.  The larger B/Ds have more overhead and have to charge higher fees or haircut your payout b/c you don’t have your 24.  I just encourage you to do your homework on the charges b/c there are a lot of good smaller B/Ds out there that have platforms that are as good, if not better, than wirehouses and larger Indy firms.  Remember, you are going independent, so unless you aren’t going to do your homework and go to some place like Raymond James, your clients aren’t going to recognize the name of your BD anyway.  I just had a conference call with Mark Elzweig & Co, which is one of the best recruiting firms in the industry, and they are seeing FAs bringing about 90% of their book regardless of where the FA lands.

Nov 13, 2009 12:04 pm

Mr Clutch brings up another good point.  Most cleints won’t know your BD.  They know you and will move because they trust you.  The only other thing they will care about is where are there assets held/custidied.  If you have to explain who your clearing firm is becausse no one heard of them or make excuses for them becuase their parent company had bad press that may cause some hesitation.  I would make a decision on two main factors and then get more granular to finalize your decision:

1.  Pick a name brand clearing firm that your clients will know and trust 2.  Pick a BD that is structured best for your business mix   All the major clearing firms provide the BDs with with plenty of options.  The BDs customize them or rebrand them in different flavors.
Nov 13, 2009 2:23 pm

I’ve never once in 8 years as an Indy have a client care,question, or know/recognize who the custodian/clearing firm is. 

  I agree the ticket charges do make a big difference in ones profitability.  You just have to be aware of which funds may have $0 ticket charge buys on your system, use the fund/annuity companies directly for smaller accounts that don't need to be in brokerage, and so on.    Finding a good small b/d probably is better than a big one but I think you'll continue to see the smaller b/ds getting bought up.  my original b/d was really small back in the day and has been merged/aquired twice in the past 8 years. It's not just the big wirehouses that are consolidating, the Indy's are to.   you just don't hear as much about it. 
Nov 13, 2009 11:42 pm

LPL or Woodbury.

Nov 14, 2009 9:21 pm


  Some great suggestions on this post.  I myself am in a similar situation as you, spent almost 2 hours talking with cobia and fred from pmr, they really knows this gig inside and out.    My 2 cents:  Have you tried talking to other folks at your office about teaming up?  Only do this with folks you trust.  It can be an easier leap to do with others not to mention you should get more attention from the b/d's and your startup costs would be split in several peices.
Nov 17, 2009 2:18 pm

I can only talk about LPL as that’s who I clear with.  They take 10% off of your commissions and there are ticket charges in their brokerage and some wrap accounts depending on the fund company’s marketing relationship with LPL.  Stocks/ETF’s trade at an expensive $15 buy/sell, but you don’t do lots of stocks anyways.  I know LPL wants to make sure you’re taking home at least $65k gross per year just so they can see that you’re self-sustainable.  Talk to them for more info.