I am one of 2 advisors working in a branch of a regional firm that believes in trade-offs and a-share mutual funds. We are both considering a jump to an indy outfit as a team, but health insurance is a major issue. He is and always will be uninsurable under an individual health policy.
We have looked into Wachovia, because they have group health, but were not terribly impressed. I'm a proponent of fee-based business, and although their wrap products are impressive, they seemed to be very pricey. My understanding is that they charge 35 bps for the manager fee on their internally managed wrap accounts, as well as a fi-net admin. fee of 25 bps. I don't want to charge the client 160 bps and only gross 100.
The only other platform that seems viable is the Ray James independent employee structure. My understanding is that there is no manager fee on their internally managed wrap accounts and the admin fee is only 9 bps. That sounds almost too low to be true.
I am curious as to what the posters on this board know about the independent employee platform. I've searched old posts and found nothing. If this has been addressed before, I apologize.
The 9BPs may be true (I can’t remember to be honest), but keep in mind that it’s 9bps off your grid. IE, if independent employee pays out at 60% and you charge 100bps, you’ll keep 51bps out of 100.
And I'm sorry, but I can't[more like won't] be of help on the finet charges side, I don't do managed money. But I am pretty sure they pay out 90% on Managed Money, but I sure don't know what the 90% is based on.
If the economics of independence is your driver, then you should spend more time learning them and with each partner you are considering.
The internal charges are a Wachovia Advisory Services Group product is actually 25 bps, then there is an admin fee that is based on the size of the account- but let's call it 25 bps to be conservative. So, at 1.5%, you get paid 90 bps before local expenses. That is $9000 on a $1MM account.
Then there is the non-discretionary accounts which you and the client manage with a wrap fee and you pay an admin fee, then get paid 90% grid on that.
Bottom line is at the end of the day, your range on getting paid for your business will range between 72 to 77%, unless you are a portfolio manager, where you would sit around 80 to 82%. After local expenses, you should have a bottom line of 50-65% depending on how well you manage overhead and how well your production exceeds your fixed expenses.
Whether you are looking at RJ, LPL, Wachovia, or another, this is generally the rule. All can run an economical analysis for you and when it's all said and done, you'll need to compare more than just the math, as they will all be better than any employee model in the industry
As you were, I did not mean to address Mr A, but the original requester of information. Please excuse the mistake.
If you are going indy, why don’t you just get a group health plan for “Nomokoolaid4me Wealth Management”? Talk to someone who knows about this subject. Some states have no underwriting for small groups.
I think the group would be too small to avoid underwriting. I used to deal
with group health neg’s for the prior businesses I worked for. A group of
3-5 is not much of a group. Not enough experience for a rating. May get
a slight roup discount, but would be subjected to underwriting (in which
case some may be denied coverage).
I only dealt with larger groups (low thousands), so I am not as well versed
with small groups, but that was always my understanding in talking with
our health consultant.
In all of the states in which I have a health license, an insurance company cannot deny a person individual health coverage--for any reason--period. They can rate the hell out of them, and make the insurance astronomical in price, but they cannot deny coverage. It is against the law. If this is in fact the case, some states offer an "ultra high risk" pool or something similar to that, where the premiums of that pool cannot be any higher than an insurance company's actual claims experience. In one state where I am licensed, the high risk pool runs about $520/mo. for a $3000 individual deductible HSA based plan for a 50-year-old male. Check into it. This may not be quite as big of a concern as you think it is right now.
I have no idea which state you reside in. However, you may want to ask a very knowledgeable health insurance veteran in your state what your options are. Good luck!