I have known a few.  My experience was that most of them were rather disappointed.  I have seen more satisfaction from EDJ guys going indy rather than to a wirehouse.  I think the only time it makes sense is if you are really trying to swim upstream with your client base (yes, I know we all are).  Some of the wires carry more "panache" and upscale services compared to Jones.  The guys I have known were disappointed because the front money ended up being less impactful than imagined (due to taxes, holdback, forgivable over time, etc.), and they seemed to have to deal with more politics. 

I think everyone's situation is going to be unique, though.  In some situations, it may be the right thing to do.  But I would not do it just for the front money.  Make sure you know what you are getting into.  With Indy, you have more control over what you get into.

One of the more difficult things about the Jones model is the isolation. I've always been a team-oriented person and often find myself wishing I had other "teammates" to help tow the line, offer encouragement, ideas, specialties, etc. (Sure, I realize we can always call other folks in our region, but there's so much account stealing that goes on, it's difficult to trust anyone who's chasing the same dollar as I.)

I have been with EJ for sometime, and have always been recruited, but this is the first time I’ve really listened. I do not see the MF wrap as very customizable, and I had really been looking forward to it. It really looks like a cookie cutter approach with a few funds you can replace in the same asset class. I see this as no way to help provide “alpha” for clients. There would be no way to customize based on where we are in the investment cycle. In some ways it seems buy/hold and rebalanced quarterly and with as long as it took to change Putnam, I guess I question if we are really willing to make the necessary changes .

I always understood being conservative, but we’ve talked about financial planning for 10 years and still do not have access to the Monty Carlo calculations. The asset allocation models have only been adjusted in the last few years and for a company that wants to compete with the big boys, we still never have an opinion on the market, the economy, or even on some of the bonds we sold until its almost too late. Sorry for the vent, I just don’t understand if we are ever going to be nothing more than a sales organization rather than helping people manage money. Thus I have been listening for the first time.

broker5,

In regards to “Teams” , I have 2 friends at other firms that are part of a team. One has a “Hierarchal” team in that he is the Chief, and the others have different roles plus all still service accounts. He has 5 other FA’s with him and 2 assistants that are licensed. The split is 70/30 on old business and 50/50 on all new business. They do about 2.8 million.

The other team is built on strengths, one FA is designated to do nothing but look for new business, one does most of the closing of business and proposals, one provides client contact and service and the other trades and monitors portfolios. They are successful and bring in alot of new assets and do about the same production as the first. Equal split on new business.

I can definitely see the synergy…but it has to be well defined and organized. Still someone still has to lead as I see it. It does sound intriguing.

“Has anyone left EJ and went to a wirehouse ? I would be curious as to any comments you may have as I am being recruited pretty heavily.”

It’s my opinion that they are the true “wealth managers” in the investment industry; the folks who are taken most seriously when it comes to handling HNW and UHNW investors.

I left EJ and went to Smith Barney almost two years ago. Best thing I ever did in my life.

BTW, the client is always always first. Don't buy the Green Machine's hype that they are the only ones in the industry that do what's right for the client. It's all part of their brainwashing regimen.

And yes, the wirehouses have a lot more clout with the HNW and UHNW. It's because we have EVERYTHING. That was the most eye opening thing to me when I moved. Just how plain vanilla and streamlined Jones has made their business model. Which, by the way, is "Let's get 3 points on every dime that comes through this place and only sell funds that give us revenue sharing." I'll never forget a regional meeting where the regional leader was trying to do a session on how to run a stock portfolio and the GP in attendance called him out for not talking mutual funds instead--in front of everybody.

Thanks!

I looked at wirehouses before going indie. Here were the questions I really had to ask. The answers are different for each of them. What kind of customer do I want to serve? What kind of service and support do I need or want? Is there someone I could partner with in my area either wirehouse or indy? If I partnered what would be my role? What role would I want and what strengths would compliment each other? After all that what kind of costs and comp does this mean? Will my clients move based on the relationship I have with them? Will this improve their future and mine? What happens if we seperate the practice/team or if one of the partners retires or dies?



A lot of people wake up to the fact that they want more for their clients at EDJ. Then they realize that maybe the grass is greener. If you have truly built and advisor relationship with the client then you are probably ready to leave no matter what. At the same time there are a lot of Jonesers that need to stay there because they are good salesman not advisors. Regardless, it will take a solid year to decide, plan the move, make the move and transition your base. Make sure you are financially ready to do that without the big money promise so that your decisions are not clouded.

As I stated in the past, I was recruited by Smith Barney in 05 and 06.  I was still in the brainwashed mode in 05 with the green machine and scoffed at the thought of going to the lowly Smith Barney.  As my attitude was turning, I recontacted the BOM in 06 to look at the opportunity.  An office of  7 advisors, with the youngest (at that time) was 53 years old.  They all had been with the firm 15 plus years (I guess from Shearson?).  The BOM was needing to set up the next generation of Advisors to transition the vets.  I met with the BOM several times, at breakfast, at the office.  I met f to f with a Vet in the office to discuss SB.  I was offered 1.5 Trailing upfront with an equal amount of stock based on a vesting schedule contingent on the % of clients came with.  If 50% came, then 50% of my upfront would be matched with stock, vesting over 5 years.  THis program would have been in place, If I remember correctly, the first 18 months. 

My input if interested… I had a good run at Jones. I hit profitability and location gain within the first nine months. I then went to a wire for 7 plus years. You need to ask yourself what do you want to be. Every team I saw at the wire failed to be a team three years later. Once you join a team your clients become the teams clients. If you don’t have any clients that a good thing. Plan for the worst and hope for the best. If you leave the wire and your teammates will be happy to call your former clients and assure them that the remaining team will take care of them and that in a good faith gesture they will cut the fees for the next year if they stay with the team. (And why wouldn’t they stay you told your clients how great your teammates are.) You get the picture.   I learned a lot at the wire but I regret I didn’t go independent sooner. You greatest value is the client relationships you have and your ability to create new relationships. You can build your own team at an independent practice. I have a good friend at LPL who has a team of 4 people working full time for him. He’s grossing just over a mil. At a wire he would be lucky at his numbers to have a full time assistant to himself.



Up front money is fools gold. I got a check when I joined the wire. My first $10k of gross every month covered my imputed interest and taxes on that check. I had a five year note. Now they typically go for nine years! On bad months I had pay checks for $0.00. I just went indy and could sell my practice now for close to 600K based on current rules of thumb. That would be taxed at a cap gain rate of 15% not as ordinary income.   I was offered 700K at from MS. In real dollar value cut it in half.



One last thought: “If you aren’t the lead dog the view is alway the same”

  That would be taxed at a cap gain rate of 15% not as ordinary income.   

I base the statement from what my CPA told me. I was also told the same thing from people at Finet, RJ and LPL. As far as how the buyer records the expense I’m not sure how they should record the expense. I will ask my CPA next week. I would like to know myself because I hope to buy out some other practices in the future.

If you can, let me know what you find out. I am wondering if it would work as a capital sale/purchase on a long term earnout arrangement with split revenue as opposed to a one-time transaction, which is generally not the smoothest way to do it.

Thanks

They are often longer-term earn-outs.  This protects both the buyer and the client (keeps the seller motivated and in-the-game for a while).  And often the buyer doesn’t have the cash to pony up to buy it outright.  The exception is sometimes the larger wealth management practices, which may do it it one time (they have the $ resources), but with the contractual agreeement that the previous team stay on for X amount of time (often there is a holdback or incentive).