Some help on compensation agreements

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Mar 20, 2007 3:27 pm

Hi everyone, first time posting on this board I was over at financial-planning's forumn before.

I am new to the business, I have a 3 month intern at Northwestern and a 9 month stint at Ameriprise under my belt. I have been fairly successful and am in negotiations with an indy to receive mentorship...

Here is the problem, I have no idea what payouts should be?

He said 50% to him and he would mentor pass me referrals and pay my E&O and rent for first year. He will retain my clients unless I stay for two years after which I keep my clients.

When asked if this payout is negotiable he said yes. I have nothing to put this up against though at Northwestern I was an unpaid intern and at Ameriprise payouts ranged from 42-46% but everything was paid for and provided (now I will be paying for my own printing ink etc.)

My question is what is normal and is there a place (website) that compares payouts I know BD connect does but I havent got the capital nor the assets under management yet to go completely independent, not to mention I still need training.

Any help would be great,


Mar 20, 2007 3:47 pm

You need to provide us with more details(or iron out more details with him) if you want good feedback.

For example-if you are going to pay E&O and rent after the first year, will your payout still be 50%?

If he is absorbing those expenses for the first year, passing you
referrals, and then increasing your payout in the second year as you
bear the E&O and rent, I would suggest that he is offering you a
pretty good deal.  Doesn’t come with the training salary that you
would get in a wirehouse, but at a wire you’re unlikely to get referred
accounts and one-on-one mentoring, nor the freedom to choose how you
want to do business compared to this situation.

Make sure that the issue of you owning the accounts if you stick for 2
years is PUT IN WRITING in your contract.  This is important.

Last but not least, what happens if you do well?  Do you get a bonus or higher payout if you meet certain milestones?

I find it hard to believe that your payout on securities business at
AmeriEnterprise Rental was so high on securities.  Maybe on
insurance and VA’s.

Mar 20, 2007 4:05 pm

The other thing you want to iron out is what 50% to him means.

If he's working off an 85% payout (before ticket charges) he might be saying to you that you'll get 35% minus your ticket charges.

Or he may be saying that for every net dollar of commissions you get, you owe him 50 cents.

If you are then working off an 85% grid (not assured, it depends on production numbers generally) minus ticket charges might bring you down to a net 70% payout that you split with him so that you again are working off a 35% payout.

Bottom line being, of course that there are no free lunches and even fat payouts come way down to Earth when you're sharing them with three or four peoples. (the trader, the b/d, the senior partner and you). 

I know this wasn't too clarifying, but it does at least let you know where some of the hidden land mines lie.