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Investment Advisor for an RIA

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Oct 29, 2009 8:17 pm

I am in talks with an RIA about potentially joining the firm as an Investment Advisor.  They are willing to pay a salary and potentially a percentage of the revenue.  They manage about 300 million at 1 %  with a staff of 8.  I was wondering if anyone has expereicence with a set up like this and  what percentage of revenue would be reasonable to ask for ? 

Oct 30, 2009 5:44 am

depends on what you bring to the table.

  Are you new in the business? Existing book?
Oct 30, 2009 12:19 pm

I have been in the business 10 years , the book I could bring is 20 million, but it would take time. The book I am taking over is about 65 million.  I am thinking if they charge 1% thats 650k  , so I am asking for 20% of the existing revenue and 20% of the revenue on clients I bring.  Other wise if they pay straight salary what would be my incentive to grown the business.    Maybe I am way off I don’t know.  I appreciate your thoughts.  Thanks

Oct 30, 2009 4:57 pm

I could see 20% of the book you take over, but why would you give them 80% of the revenue on clients YOU bring??  Some of it depends on who pays the overhead.  If you open a new office for you, that means their income immediately goes down.  If it is all on the firm, then your payout would likely have to be more "wirehouse-like".  So I guess at the end of the day, if you are managing 85mm (65+20) at 1%, and the firm pays all the overhead, your net payout should probably be somewhere in the 25-30% range, with incentives to bring in new business.  It might also depend on if they have to hire staff to help you, or if the back office at the home office can do most of the paperwork.  But on the surface, if they pay you 30%, that leaves them about 600K for overhead and profit, and a book of business that will now actually get serviced and leveraged for future business.

Oct 30, 2009 8:48 pm

The company is paying all the over head. The bulk of the paper work and servicing is down by the main office.  So I am asking for 20-30% of the revenue onexisting and new clients.  So they will pay me to provide relationsip and retain  existing clients and I am incented to bring in new clients also.   I think that is reasonable and allows me to grow with the firm over time

Oct 30, 2009 9:27 pm

humn, tough one. If you are servicing their book, you should get paid percentage of revenue... but I would assume you would be giving up your book to the sake of the firm.

Nov 6, 2009 4:14 pm

It sounds like there are two models being confused: Advisor and Solicitor.

As a solicitor the expectation is you bring the clients, get paid and get out of the way.  In this model if you are getting 20-30% to perpetuity, then that is not bad.

If you are an advisor, the deal is horrible.  You know you have about $600K in revenue and you would get about 50% at a wirehouse.  So it looks like you are breaking even on your existing business, but not making as much on new business. 

If you went completely on our your own the net payout is about 65%.

Hope this helps.

Good Luck
ash - The Independence Experts