PA Noobie
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Hi guys,
I've been reading this forum for a few months and finally decided to join.Iceco1d,
Why in the hell would you want to be a NEW IR/FA when it sounds like you already know how to make good money doing something else. This is a very hard business and if you are getting married I hope your future wife knows you are not going to have any free time for like 3 to 5 years. Also you are right in that 250K AUM is not going to pay the bills and wait till you start prospecting. That is the part that makes people leave this business. So what firm are you at that got you 250K AUM without prospecting?[quote=iceco1d][quote=Consejero]Iceco1d,
Why in the hell would you want to be a NEW IR/FA when it sounds like you already know how to make good money doing something else. This is a very hard business and if you are getting married I hope your future wife knows you are not going to have any free time for like 3 to 5 years. Also you are right in that 250K AUM is not going to pay the bills and wait till you start prospecting. That is the part that makes people leave this business. So what firm are you at that got you 250K AUM without prospecting?[/quote] Ha! Well, that's actually more than one question, but here goes: I'm getting into this business because it's what I love to do. College & high school friends were asking me to help them allocate their 401Ks long before I even thought about taking the 7. Second, before I started my .com in 2002, I worked as a Realtor for almost 2 years (again, while I was an undergrad - btw, 19 year olds generally suck @ selling homes!), so I'm pretty much used to being "on my own" and having a 9-5 with a regular paycheck bores the heck outta me! My future wife is totally awesome...I am definitely BLESSED in that regard (nuff said?). Also, my firm is a major player in the 403B market here in PA, and my wife is a teacher...pretty neat huh? As far as AUM..it's mostly people that I went to grad school with...those same people that I was helping with 401K allocations (almost all Fidelity, no less...argh), I now have their Rollovers from past jobs. It's pretty neat actually...I bet 75% of my immediate family doesn't even know I took the 7 yet; I have truly done ZERO prospecting so far. Thank you for the post by the way, it is appreciated, as is any insight/advice in the future (thank you ahead of time!). [/quote] If you have found a market that no one else has found then go for it. 403B business in my neck of the woods is not easy to come by. Good LuckSo I take it you are indepenant? You did very well on your exams, congrats! I hope you are correlating the housing down-turn with the the economy…which will influence our industry.
Yes, It will be a very challenging environment with everything that is going on. Just study the whole situation, US and global economy ,and do what you feel is best for your clients.
The scary thing is some of my colleagues really think that American Funds ICA aivsx will continue to run at 12.7% just because it has 70 plus years of history. I'm sure you can see that type of buy and hold philosophy does not apply to todays markets. Those FA's are going to be in for a rude awakening in the next year or three! I think you will be onto a steady pipeline with 403b's! Just keep on diggin![quote=iceco1d]
I'm glad I don't have to screw people over for the first few years just to have an income...even though I really HATE my other career...I will do what I have to for a few years. [/quote] Easy there, killer. With those test scores you can surely do some basic math. Sit down and figure the costs of paying a commission versus paying a fee each year, say, over a 10 year period. I think you'll find the commission is less expensive and definitely doesn't constitute "screwing people over." The fee-based business is great for the broker. I'd love to have my business annuitized; however, more often than not, fee-based is not the most appropriate option for the client.[quote=iceco1d] Like every other professional, the fee is the fee. I don’t send a bill for my time when I help a client allocate their Fidelity 401K, or when I show them how to get a copy of their free credit report (without getting roped into some ridiculous Credit Guard service), etc. If you don’t need help, and you know exactly what you are doing…go to E-trade. [/quote]
Welcome icecold. Sounds like you have a more comprehensive understanding of some of the macro issues in this industry than some who have been toiling in it for years.
I just want to point out an inconsistency in your logic that many overlook and which you might appreciate. If you believe that the real value you bring to the table is your expertise and advice, fees are the most consistent with that logic. (I’m NOT try to get into the whole ‘fee vs. commission’ debate right now, but rather make another point, so please hold your commissions are netter/fees are better cat-calls.)
If that is true, then why would it NOT be true for someone’s 401K? Don’t those assets often represent the majority of many clients’ investable assets? Wouldn’t your advice there be even MORE important to them than on the smaller asset base you’re charging a fee for? If you charge a fee for your expertise and advice on their other assets - including perhaps those rolled over from an old 401K - why not do the same for their 401K? Are you a professional with this pot of money, but not with that one?
Think about that.
I know this sounds heretical to most who only have experience in the wirehouse or non-independent worlds, but for most it’s because as registered reps your broker/dealers don’t allow you to do so for regulatory and liability reasons which I won’t enumerate here but are substantial.
There is an alternative. It’s not right for everyone, and maybe not even most. But if you really believe that you should charge a fee for your advice, it is the logical extension you will likely reach at some point.
It’s independence, either in the form of full RIA or perhaps a hybrid, dual-registered RIA affiliated with a fee-friendly independent broker/dealer. There you are free to charge a fee for assets held away - even in a 401K - so long as it is fully disclosed.
Just something to think about.
[quote=iceco1d]
After having studied finance for 5 1/2 years in undergrad & grad, I'm WELL aware of the effects of ongoing fees 20 years down the road. I actually had trouble with this (from a moral standpoint) when I started out..but I have rationalized it like this: I'm going to do fee based business; 20 years down the road, I don't want to be "beating the streets" still, and I don't think i'll be happy living on 12b-1s (if they still exist then). [/quote] So, you're "well aware of the effects of ongoing fees 20 years down the road" and have had "trouble with this from a moral standpoint," so you decide you'll overcome this moral obstacle by deciding to do fee based business because "20 years down the road you don't want to be beating the streets" and you "won't be happy living on 12b-1s."Welcome to the business; that's one hell of a rationalization.
Don’t fret it, ice. This is just one of those issues that generates heated debate, to say the least. Make up your own mind, and don’t worry about those who disagree with you. Neither fee or commission is inherently bad or better, certainly from a moral standpoint, despite what some may argue. If you provide a service, you deserve to be paid reasonably for it, whether through fees or commission. Just make a strategic decision and go.
In my opinion, the argument about which is cheaper over “x” period of time is of little value, as cost is only part of the equation. Price is only issue in the absence of value.
If you add value to people’s lives, they will gladly pay you a reasonable price for it, even if there are cheaper alternatives available. If it was only abut cost, everyone would drive Yugos.
Focus on adding value, and the cost will take care of itself. And let the howls of angry protest from commission only zealots fall on deaf ears. You have bigger fish to fry.
[quote=Morphius]
In my opinion, the argument about which is cheaper over “x” period of time is of little value, as cost is only part of the equation. Price is only issue in the absence of value.
If you add value to people’s lives, they will gladly pay you a reasonable price for it, even if there are cheaper alternatives available. If it was only abut cost, everyone would drive Yugos.
[/quote]
Bingo.
Thanks guys! BTW Morphius...was it you that originally posted that quote? I read it a few months ago when I was just a "lurker" on this forum...stuck with me from the moment I read it. Really though guys, I do appreciate all of the comments...I'm glad I decided to finally join the forum. [/quote][quote=Morphius]Don’t fret it, ice. This is just one of those issues that generates heated debate, to say the least. Make up your own mind, and don’t worry about those who disagree with you. Neither fee or commission is inherently bad or better, certainly from a moral standpoint, despite what some may argue. If you provide a service, you deserve to be paid reasonably for it, whether through fees or commission. Just make a strategic decision and go.
In my opinion, the argument about which is cheaper over “x” period of time is of little value, as cost is only part of the equation. Price is only issue in the absence of value.
If you add value to people’s lives, they will gladly pay you a reasonable price for it, even if there are cheaper alternatives available. If it was only abut cost, everyone would drive Yugos.
Focus on adding value, and the cost will take care of itself. And let the howls of angry protest from commission only zealots fall on deaf ears. You have bigger fish to fry.
It might have been me. I'm a huge fan of Bob Dunwoody...that's where I got it from.