You need to clarify – if the gross commission is $10,000 and the B/D gets 15%.  Is the math $10k – 15% = $8.5k of which you get 40% or $3,400 (in this case your net payout is 34%)?  Or is it:  40% of $10,000 = $4,000 – the 15% = you get $2,500 (your net is 25%)?   

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Both of these are very generous if you receive in addition a permanent salary of $40,000 and pay none of the expenses of the office.  The industry norm would be you would get zero salary (after the completion of training – a few firms will provide some salary for as long as the first two years) and payout somewhere between 30-40% of the GDC.  In addition, you likely would have to pay for most of your marketing expenses.

As to who the clients belong to – it is my firm belief that the client chooses.  Most wirehouses consider the clients theirs not the advisors.  Legally, have you signed a non-compete and/or non-solicit contract?  That is the real answer, but you can always talk to an attorney about your options.  But if I am the client and my advisor switches firms, who is to tell me that I can’t move my account?  The question becomes can you contact them, can you take information regarding that client, and can you solicit them when you move?

As to licensing and continuing education, that can be all over the place.  Generally wirehouses will pay for some or all of the licensing and registrations, depending on your revenue (for example if I want to be registered in <?: prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Texas (which is over $200 yrly – if my gross commissions aren’t at least $1,000 annually from Texas, then they won’t pay it).  Some will pay for and provide the continuing education, some won’t help at all.

Your firm is discussing moving to 100% commissions next year?

I took the 100% commission part to mean that the base salary might disappear and sko would only be paid based on revenue.

I'm confused.  If your firm is an RIA firm and all new accounts are going to be fee-based, your GDC is going to be zero.  The exception is if he is actually an IAR under his B/D's corporate RIA and they make all RIA business go through the grid.

Anyway, from your post, it sounds as if on most accounts, you are only getting 5% or 17%. It's tough to tell based upon your post.  Ex. GDC =$1000.  After dealer concession =$850 x .2 =$170 or GDC =$1000 x .2 = $200 -$150= $50.

I think his "commission" is not what most of us consider to be commissions (GDC).  His commission is really a "bonus" paid from the owner (since he stated it comes from the owner, not the B/D).  So he gets "commissions" from both "commissioned" products (that the owner earns through the B/D), as well as well as advisory fee business (the RIA piece).  So it sounds like his salary is going away, and we will just be earning straight "commission" as he calls it.

SKO, you are in what at a wire house would be traditional hunter-skinner partnership. That is; one partner, usually a junior partner, hunts for fresh prospects, and then brings them to the senior partner who skins them. That is, of course, closes them and makes them a client.

Thanks to everyone who has responded thus far.  I really appreciate the help!

It seems as though there’s a bit of confusion surrounding my ‘commissions’.  In the truest sense of the word, I don’t get paid commissions since they come from the owner and not the B/D.  I’ll try to explain it a bit more.

All commissions from the B/D get paid to the owner of our firm.  We (the other 2 advisors) get paid only from the owner of our local firm.  Here’s an example of how I make ‘commissions’:

ASSUMPTIONS: a new client bringing $200,000 to our firm - the firm’s annual ‘advisory fee’ is 1.25%.  The fee is actually taken quarterly (25% of 1.25% each quarter) but I’ll keep it simple and just use the annual fee.

Example:  As I stated in my original post, when I get a commitment from a prospect to meet with our firm, as of today, the owner of the firm handles all of the 1st meetings with the prospect.  The first meeting is only to gather info - current assets and investments, last tax return, estate plans (if any), outstanding debts and any other pertinent info.  From there, the prospect will come back for a 2nd meeting where we’ll detail for them the holes in their total financial plan and how our firm can help - specifically with their investments.  After the 2nd meeting, should the client hire our firm, the owner will then ‘refer’ the new client to one of the other 2 reps - IF the new client’s assets is under HIS minimum.  Of course, our example is under his minimum so we’ll assume he’s referring the new client to me.  Now - here’s how I actually get paid my ‘commissions’:
1.  Take the new client’s $200,000 x 1.25% (our firm’s annual fee) = $2,500
2.  Take 15% (B/D’s portion) off of $2,500 and you have $2,125 remaining.
3.  As mentioned in my original post, since the owner ‘referred’ the new client to me, I only get 20% of the remaining amount ($2,125).  So, my ‘commission’ would be $425.

There are times when our firm’s owner will decide to allow us to handle the 1st and 2nd meetings with our prospects.  In those cases, should the prospect hire our firm, I would then get 40% ‘commission’ instead of the 20% ‘referral’ percentage.  So - using the same example mentioned above, my ‘commission’ would be $850 if I handled the 1st and 2nd meetings.

Some other important details - we only get paid that ‘commission’ ONCE.  Meaning, after the $425 or $850 payment, that’s it.  We will meet with our clients semi-annually to review their portfolio with them.  Depending on the amount of total assets with our firm, we may even meet with them quarterly.  If we were to talk the client into transferring additional dollars to our firm, we would make NOTHING in ‘commissions’.  Putting it another way, we don’t get paid any ‘commissions’ for bringing in new money from existing clients. 

Also, there’s no guarantee that the prospects on my prospect list will be referred to me by the owner should he gain their commitment to working with our firm.  So - I could work my rear-end off to get them in for a meeting but get nothing in return.  However, if the owner refers that prospect to the other Advisor after the prospect agrees to hire our firm, that Advisor gets the 20% ‘commission’ for doing nothing.  Of course, it also works the other way, too.  The possibility exists that I could get a client referred to me that was on the other Advisor’s list as well.  There doesn’t really seem to be any consistency in deciding who gets which clients/referrals.

Finally, to clear up a few more items, our firm is likely moving to 100% ‘commissions’ next year - meaning - no more base salary.  I keep using quotation marks on ‘commissions’ because, again, they’re not commissions in the truest sense of the word.  We get paid directly from the owner - not the B/D.  The owner is the only one registered with the B/D with respect to commissions.  Of course, I’m also registered with the B/D as an Advisor - but my commissions agreement with them reflects amounts of 0%.

If we do move to 100% ‘commissions’, I’m betting our new ‘commission’ amount will be around 35%.  However, there’s A LOT I don’t know about how and/or what we’ll be paid on.  My hope is that we’ll get paid when the firm gets paid.  In other words, I’m positive there will be many clients assigned to me as their personal Advisor.  If that’s the case, I’m hoping I will make 35% of each quarter’s ‘advisory fee’ (minus 15% for the B/D) for EVERY client assigned to me.  Under that assumption, we would then also be paid for new money transferred to our firm from existing clients - unlike the current structure.  Putting it another way, if the client’s portfolio grows (new money or higher return), we’ll make more money because the ‘advisory fee’ would be higher.  The ‘advisory fee’ is taken from the client’s investments quarterly and it’s based on the portfolio value as of the billing date each quarter.

Some of you are also correct in your assumptions regarding office staff, supplies, etc.  I don’t have to pay for anything with regard to those costs.  The firm has 7 support staffers who represent positions from receptionist to client services and one person who primarily handles the daily trades.  I don’t have to pay for marketing (after all, I don’t own the business) nor do I have to pay for office supplies, etc.

Hopefully, that helps you to better understand our firm’s structure.  Since I’m new to the business, I’m just not certain how ‘different’ our structure is compared to other firms.  How ‘good’, ‘bad’ or ‘not-so-bad-but-not-great’ do I have it?  Is this firm structured in a way that will afford me the opportunity to make a decent amount of money or is it just a pitstop on the way to bigger and better things? 

I know that’s a question which can ultimately only be answered by myself but I’d still like to hear your, obviously more educated, opinions.

Thanks again for all the responses.  I’m looking forward to hearing more from you soon!

Best of luck to all of you!

Let me repeat myself. 

It sounds really shady to me.

Anonymous -

I understand what you’re saying about this being a one year job (pit stop) to learn the business and gain experience. 

In reality, I’m hoping it could turn into something more but I’m not holding my breath.  That’s why I’m looking for advice from all of you.

Should this truly end up being a pit stop position, I want to make sure I understand what else is out there from the standpoint of average commission amounts, expectations, etc.  If I end  up leaving my current position, I’ll be leaving without an established client list (since I can’t take them with me).  From what I’m reading in other posts on this board, many people are saying that’s a big negative…and that concerns me.

Thanks for your input!  Honest opinions are exactly what I’m looking for…even if they’re not especially positive as it relates to my current position.

FYI - I’m not intending to say your comments are negative…just honest.

Thanks again.

It sounds like a decent 1 year pit stop learning experience since he is very successful. 

In my opinion being able to learn the business at a company that’s smaller, and potentially less busy would be better. If you start out working at a wirehouse that particular branch could be so busy you’d just get caught up in the shuffle. Something to think about.

I’d work there for a year and learn as much as you can.