Getting paid when you retire?

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Mar 31, 2010 4:25 pm

I am wondering about how some of the firms in the industry pay brokers upon their retirement. Is it a multiple on their trailing 12 paid as a lump some or over a specified amount of years. Any information regarding this would be helpful. Thanks

Apr 1, 2010 11:14 am

This TOTALLY depends upon the firm and it's policies and procedures.  The smaller indepenent  firms are usually more flexible.

Apr 1, 2010 12:08 pm

At Jones, the typical policy is a 4 year payout.  Year 1 70% of gross, year 2 50% of gross, year 3 30% of gross, year 4 is a 10% "Consultant fee".  You also get to stay on all company benefits in the first 3 years, and can still earn profit bonuses and 401K profit sharing for your % of the payout and net income.

The last I knew, the Merrill policy was similar.

Apr 1, 2010 12:22 pm

In other words, put a bunch of money away. The retirement is minimal.

Apr 1, 2010 2:05 pm


In other words, put a bunch of money away. The retirement is minimal.


All-in, it's not much less than selling an indy practice.  Unless you have a fee-only, high-margin, high grossing business, you will likely get 2.0x gross or less.  So let's assume you produce 500K, and have a mix of 50/50 commission and fees.  You will probably get about 1.5X gross.  So let's assume you get 750K.  At Jones, you would get $320K, plus profitability bonuses, plus profit sharing contributions, plus benefits.  So let's call it $400K even in economic value versus just walking away.  You don't worry about finding a replacement, you don't worry about hiring a lawyer and drawing up contracts, you don't really have to do much monitoring, you don't have to worry about the guy paying you (it comes from Jones), etc.  So although it's not nearly as much as selling an indy practice, at the end of the day, it's still a pretty good deal.

Apr 1, 2010 2:13 pm

Do you think that a wirehouse broker would be better off leaving his/her book with the wirehouse or selling it off to an indy? Could they make more money selling the book to an indy?

Apr 1, 2010 3:01 pm

You can't really "sell" a wirehouse book to an indy....they don't allow it.  The only alternative is to join an existing indy practice in exchange for purchasing whatever assets you bring over.

You may be able to "sell" your book to your "team" at a wire, but I think the deal is usually based on the wirehouse policy.  Someone at a wire would have to address that.

Apr 1, 2010 3:35 pm

It is illegal to sell a book of ANY kind and in any way without the approval of your firm.

Apr 1, 2010 3:44 pm

Can the book be acquired by hiring the FA into the indy for a year or so before retirement with a better retirement package waiting for him/her?

Apr 2, 2010 10:11 am

Yes, you can leave the wire, and try to transfer as much as possible with you.  But keep in mind, it is very contingent on you moving a lot of your book with you.  Look at it this way...if you were a client, and your 62 year-old advisor leaves Merrill to go indy, how confident are you in moving?  You know he is going to retire soon, and you have no idea what this new firm is all about.  So maybe you wait a while and see what happens before you decide to move.  You catch wind that he is transitionaing his book to the new firm, and yet you still don't know anyone there.  In the meantime, you have been talking to the FA's at the same branch you've been working with for years.  Same assistant, same faces, same place, no paperwork.

Unless you're advisor was a rock-star and you trusted him implicitly, chances are you might not move.  At that point, the advisor is screwed, as he will only get paid on the accounts that move over.  So if you are going to go indy for buyout, you likely want to do it when you have at least 10 years or so before retirement.  Look at it this way, would you rather get 1.5x a 40mm book, or .75x a 100mm book and not have to worry about moving all your clients at a time when you are only thinking about golf and lazy days?

Apr 21, 2010 3:37 am

Retirement means many different things to different people.Some plan on doing all the things that were not possible when working.Retired at 28, that would be a dream to many people. That is exactly just what Lorena Ochoa is preparing to do. Lorena Ochoa has 27 tour victories, and is not only the first Mexican woman to be ranked number 1 within the world, she is the first Mexican period, man or woman! I can speculate all day long as to why she would retire so young, but there hasn't been any leak, just rumors as to why. Nevertheless she could be holding a press conference on Friday to publicly announce her retirement, and with that announcement hopefully she gives a reason why, for those of us that are fans.