Looking to go indy - Do any firms offer deal $$

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May 14, 2009 8:11 pm

Hi Guys,

  Long term lurker here....   I'm at a wire right now and am about to enter my last (5th) year on my contract/prom note.   Came to the wire in mid 2005 with a LOS of 4 years doing $200k with $14 million.  Did $260k in 2006, $350k in 2007.    I was clipping right along at good pace in 2008, then got very conservative after Bear collapsed and into the Summer.  I basically raised cash for my business owner clients and held existing positions for my long horizon retirement accounts.   Because of this relatively conservative approach, I didn't lose 1 client and only lost about 30% of AUM from peak to trough.  Also because of this, my production fell to $250k in 2008.   Well, fast forward to today, and my trailing 12 is down to $175k and, barring any elephant kills, it looks like my gross will only be about $200k.  AUM are currently $24million ($2 million in annuities, $8 million in the money market (ugh), $5 million in 401k plans, the rest in funds and managed accounts)   All of it is a huge bummer, but I can look at myself in the mirror without feeling any shame.   Here is the problem..... This year I turn 8 years LOS.  If I don't do $250k in gross during 2009, I get put in the penalty box with only a 20-25% payout depending on tier.  I can't feed my family on $40k a year.. and I couldn't look at myself in the mirror because of the payout beating I was taking................   So I've got to make a decision.  Suck it up, live off savings, don't look in the mirror and stay with a 20-25% payout for 6 months until my contract is over (July 2010), then go Indy OR find an Indy now that will offer a transition package.  Bear in mind, even though my penalty box payout would be horrible, I would still work off about $6k per month in money owed under the terms of my prom note.   I know that Indy's don't all (or maybe none do ala LPL, Commonwealth) offer transition deals, but I would need the $$ to help settle up with the money owed to my current firm.    The other concern I have is that my firm could chop off the <$250 brokers (UBS style), then I'd have no leverage at all when making a transition, plus not having a shingle would give the other brokers in my office more time to retain my relationships AND I'd still be on the hook for the remaining $$ owed on my prom note.   So, does anyone know of a Indy in the New England area that offers transition deals?  Am I missing any other opportunities here?   Any reccomendations are very welcome.  Thanks for reading.   Rambo
May 15, 2009 8:26 am

I dunno…t12 of $175k is unlikely to draw offers from any regional right now. And the indy shops that might offer assistance are all looking at $250k +.

  Also, starting an independent firm can take 6-12 months to plan. (Write a business plan, 2 or 3 due dilligence trips, consult w/atty, consult w/cpa, conult with re broker, source tech and furniture, create marketing info, etc, all while trying to repair and rebuild your practice.)   I would consider giving yourself a year to get your new venture off the ground which would give you time to rebuild your t12 to $300k or so, pay off the wire, and likely get some transition $ to boot.   I know this leaves you feeling somewhat exposed, but going independent on a shoestring with a wire breathing down your neck for their money would be even more risk for you and your family. IMO.   Best of luck.
May 15, 2009 9:23 am

Try and find an Indy shop in your area; all regulatory issues would be taken care of by someone else.  You may have to give up some payout in exchange, but I would be that your net would be 2x what you are receiving now.  You mentioned Commonwealth- I understand that the contract you sign with them is very restrictive.  You essentially agree that they own and control your clients if you leave.  Deal with the devil ?

Look at a bank platform.  175k T-12 would be attractive to them.  Depending on who they use for clearing and investment offerings, products would be similar to what you already have available.  Payout may be better as well (and no penalty box).  Bank referrals would be gravy for you.

Raymond James may look at you.

8mm in mmkt would be what 50-60k in gross when you put it back in the market ?  Also just a 10% up move in the market would get your AUM above 26mm and your gross back above 200k.

If you are let go due to a large scale decision, it is likely that the remaining portion of your note and non compete would be forgiven.

Get on the phones now to see what is out there for you.

May 15, 2009 9:46 am

How much do you owe… are we talking $20K or more like $120K… if it is as simple as $20K, go indy (LPL gave a friend of mine $10K and his t-12 was $135K). Then put that cash to work and get at least double your payout(if not triple at 20%) and pay it off.

May 15, 2009 5:30 pm

PM me. I know for a FACT there’s at least one full indy firm doing 20% cash up, + 70% over first 18 mos. if you move most of your clients.  I’ll give you the reps contact info.  90%+ payout, etc. still applies and big national name.  Not LPL 

May 16, 2009 7:05 pm

Go to Stifel or Hillard if you can…no penalty box, you’d be a mid-grade producer, higher payout, similar technology, and they have "deals."

Good luck.

Thanks Ice, I am looking into Stifel.  I like the St. Louis attitude.   Regards, Rambo
May 16, 2009 7:09 pm

Can you PM me?  Everytime I try, I get a bunch of failure messages…  Thanks

May 16, 2009 7:15 pm

Thanks Northfield, exUBS - I’m going to re-read and consider your advice on Monday (trying to chill on the weekends)

  Chief - it's about $80k  (I only have 20% left)   Burton - I'd love to get that contact from you.  I tried to PM you but it didn't seem to work...   Thanks again everyone.   Rambo  
May 17, 2009 4:27 pm

Go independent, and right now.  $200k gross means you take home in the neighborhood of $150k, and at some places more.

May 18, 2009 11:37 am

Rambo, I tried to PM you about the firm I work for, but I don’t think the message went through.  I left Smith Barney in January for a small, Indy B/D with a great platform.  We are offering deals.  We clear & custody with Pershing.  PM me if you would like more info or to setup a time to talk.

May 18, 2009 12:01 pm


Sounds like you're at MS. If so penalty box kicks in in 2010 unless the rules change.  You can "produce" your way out of it and receive breakpoint pay at higher grid levels retroactive back to the start of the year.  What you were doing to build your business was working and you probably have some loyal clients considering the allocations you shifted to cash.  Money in motion is how we get paid and our clients usually appreciate the ideas. Plenty of muni's at MS at 3 points...$2mm = $60,000 additional gross.  There's eventually a time to move out of some of that cash and that's what we get paid to do. 
May 18, 2009 4:12 pm

Sorry for intruding, but I need to jump in to correct an assertion in this post - nothing could be further from the truth that the Commonwealth agreement is restrictive, and that we  "own and control your clients if you leave."  Our advisors' clients are our advisors' clients - period.  If an advisor leaves us, we give them a few months to move the accounts, but then actually go so far as to send a letter to the remaining clients saying (in so many words) "hey, your advisor left, can you find a new home?"  Bottom line, we have NEVER reassigned clients and don't even like having house accounts hang around.

May 19, 2009 10:37 am

Rambo…I’m with a regional, self clearing independent broker dealer that has been bringing on several wire house guys that are in a similar situation as you. We have been able to offer transition packages to get you started and have some of the best service you can find out there. You can send me a PM if you are interested.