The value of a brand

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Mar 29, 2011 3:16 pm

I was only there about 4 years.  I only brought about 50% of my book (10mm or so brought over).  But a few caveats - this was about 95% of what I wanted.  There is a big change from the Jones/brokerage model to an RIA model.  I ONLY took households over 100K.  I left a couple hundred clients behind.  I simply don't want to deal with all those tiny, disparate little accounts.  I'm not being elitist, I just want to run a model where every client is an A client and gets the same level of service.  I also didn't want the headaches of a couple hundred clients.  If I can have 50 clients at 450K, that will be a great start.  I am only halfway there, but am gaining momentum.

It's nice to run my mgmt reports and see a 450K average household, more net, with about 10% of the households I previously had.  The beauty of an RIA practice is that, at 100% payout, and costs that are almost 100% fixed, virtually every dollar I bring in going forward drops 100% to my bottom line.

Mar 29, 2011 4:33 pm

24- One of the advantages of going Indepedent is it becomes like a Goodnight plan, only with the benefit of now being independent.

Did you look at Big Blue (LPL)?  That's where most us Jones guys seem to go...

Mar 29, 2011 4:49 pm

Yes, I looked at LPL, but not for very long.  My goal from almost the start was to form an RIA.  Get out from under FINRA, not deal with haircuts and B/D's.  Use whatever custodian I want.  Use multiple custodians if I want.  Provide whatever services I want, more flexible marketing, etc.

Honestly, most Jones guys go to LPL because LPL markets the most and that's one of the few that Jones guys know about (it's a pretty sheltered group) - I probably get 2-3 mailings a month from LPL.  Half the guys I keep in touch with have never even heard of an RIA.  And I don't mean that as a dig against LPL at all - it's just the truth.  I would wager most guys (in my area of the country anyway) have heard of LPL, Raymond James, Cambridge, and maybe Commonwealth.

In hindsight, I am thrilled that I made the move I did.

Mar 29, 2011 6:24 pm

How are you handling insurance? Do you hold licenses and run a separate agency?

Mar 29, 2011 9:03 pm

Yes, I go through a general agency (not my own).  My payout is 85%.  I do not plan on doing enough insurance to make it worth running my own agency.  I also don't want the hassles of trying to go direct.  I use one of the largest GA's in the country, so they do all the work.

Mar 29, 2011 8:19 pm

Nice.

Mar 29, 2011 11:35 pm

B24, what is your fee and is it asset based? 1%? A certain amount up to a breakpoint and then lowered? A certain amount for all assets if breakpoint met? Also, are you handling the ticket charges or are the clients? How did the conversations go with your clients when describing the nature of the fee structure? I'm not a Jones guy but understand they do a lot of American A shares. How did you explain moving from fund to advisory for those clients?

Mar 30, 2011 1:33 pm

Tax Guy,

My fee-structure is pretty simple.  Starts at 1.25% and goes down at certain asset levels.  Client picks up ticket charges (not all tickets have ticket charges - some of my funds are NTF).  Jones fee schedule started at 1.35%, so clients are still paying less than they were at Jones, even with ticket charges included.

Most of the clients I brought over were already in fee-based accounts, so no big deal.  For my A-share clients, most of them thought it made total sense, and liked the idea of using the best funds available, versus one or two fund families.  Yes, one or two of them needed some convincing, but were fine in the end.  I would say it makes much more sense for my older, retiree and pre-retiree clients. 

Mar 30, 2011 7:47 pm

B24,

How was it letting the 7 go?

Mar 30, 2011 8:09 pm

B-24, just curious, what is your fee at the high end - $1.5 to 2.0 mil?

Mar 30, 2011 10:40 pm

Letting go of the 7 was fantastic.  Yes, I lost some commission-based revenue, but the advantages of being RIA outweighed that.

As far as fees at the high-end, I'm at 1.0% at 1.5mm, 0.50% at 2.5mm, and 0.25% above 5.0mm

Mar 31, 2011 10:01 am

B24, you always seemed too much of a thinker to be a Jones guy! Good luck in your new venture and congratulations.

Mar 31, 2011 2:00 pm

Thanks Man.

Apr 16, 2011 4:43 pm

[quote=SuperMan]

Big - I think you worked at a bank and left with a large book so this might not apply to you as much.

How about the guy that works at a wire or Jones with a 20-30mm book?  If they went indy and hung their own shingle does being associated with a major brand help them raise assets quicker? I realize they might give up a few % pts of payout but do they make it up in raw production from being associated with a brand.

That is what I was asking.

[/quote]

Superman, that scenario isn't too far off from my own experience.  For me, I went through the training program successfully at ML - starting when the Dow was at 14k.  For the next few years, I built my practice during the financial armageddon we all experienced.  Couple that with the fact that my firm's bad press was in everyone's face each day.  I've lost more potential business while at my former firm on the grounds that people were watching the news and felt morally obligated to avoid giving them their money (even though they LOVED me).  Now that I'm indy, I basically tell clients/prospects that their assets are custodied at Pershing - most know or have heard of them and are comfortable.  I'm surprised that some clients haven't moved over with me just yet, especially smaller clients who I know are treated like the red-headed stepchildren at my former firm, but I'm not the type of person to disparage my old employer in that way. 

I still see a mixed bag of people who only want to work for a "big firm," and some people want nothing to do with the "big firms."

Maybe it was behind the scenes, but not once at my old firm did I ever feel I was getting someone's business because of the brand recognition.