Retention
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Is that Kurt fellow the top producer? I was only familiar with the Legacy AGE guys, and not that well at that. I would assume a top producer at WS would be doing between 5-10 million (nice narrow range) but I could be way off.
If a true heavy hitter did, in indisputable fact, leave, would it change any of your actual behavior?.. Didn’t think so.
Ferris,
You mean the one I wouldn’t ACCEPT if I was still there. Just like I declined the WB check that came with 6 year handcuffs. Keep on waiting…everything’s fine there. LOL!
Isn’t there a YHWY/Ferris pissing contest thread from a year ago? By the way, it’s been a year since we got the check so now it’s only a five year handcuff.
Don’t worry, GG, the new deal will re-cuff, tighter.
P.S. I tried to PM this stupid feud to rest. We’ll see if it takes.
Ferris,
Fair enough. I will leave you WB folks with one final thought, having seen the business from the “other side”, my eyes have been opened. I wish you all the best with whatever your decisions might be.
My two cents -
I'm a 20 year legacy AGE who left one week before the takeover. Joined the RJ hybrid platform nearly two years ago. There is no panacea in either platform. Each has its own particular strengths and weaknesses. There are things I really like and truly dislike about both. ( I started my career as a full indie for three years ) Those considering the indy or quasi-indie, especially in this market should think long and hard. I have a gorgeous office complex in a great part of town -but my net payout has been as low as 8.2% and as high as 43% . What doesn't change is the the 5-figure office expense nut I have to crack every month. Recruiting - in this market -forget it, we simply can"t compete. Though its only been two years - I'm seriously considering offers from the major regionals.Thanks very much for your candor and honesty WsXag — it’s always difficult figuring out what one
option or another would pay. And should you go ahead jump and then find out different, well it’s too late. Imagine people that just jumped to
C or Mer for that matter! I spoke with a very honest independent broker that had been independent for about 10 years. He shared that his payout
was in the area of 55% to 60% net at best. In this market, who knows.
I’ve found no matter how aggravated you are at something, jumping gives
you some monopoly money for a while until you blow it in the market or
have to pay 55% in taxes on it over several years. And within 5 months you’ll be aggravated at something new at the new place but you’ll then be stuck for 7 years or more. Building assets is
what counts and jumping around is no help in that department.
I think the new WS payout has got to be somewhat competitive with the independent channel, unless you work out of your basement that is. If you can wind up with around 44% at a big wirehouse - well, that’s not all that bad in my book. Add to that retention every time some deal is made, a few trips, and, despite the market, life isn’t all that bad.
Would love to know how you arrive at 44% payout? After ticket charges and zero payouts getting to 40% is tough under the new plan
[quote=BukiRob2] [quote=skillopie] BukiRob,
I have a little old lady client who is just like you. She hates to pay taxes. I tell her that we have a solution for that. Don't make any money!
She has taken this so far as to not sell stocks with huge gains because of the taxes. In the last three months she has achieved her goal. No more naughty taxes on those stocks...because she has no more gains.
Why are you in this business? If you stay at home and eat mac and cheese all day you will have a much lower tax liability. And that's really the most important part.[/quote]
Wow, you are completely missing the point. How many people do you know who have moved? How many have you talked to about the monthly tax hurdle? There are SEVERAL in my office that have moved from other firms to our office downtown. In many cases the tax hurdle is several thousand a month that comes out of your NET pay. That means that most of that upfront money ends up being what you use to subsidize your living expenses. There is a reason they give you so much money up front at its not cause your such a nice guy....
[/quote] BukiRob, Not entirely true. While people who move do have a monthly tax hurdle, MOST of the upfront money is yours free and clear. Let's do the math: Highest tax bracket: 35% My state tax plus local tax rate: 4% Medicare tax: 1% Total taxes: 40% If someone receives an upfront check, chances are he has an earned income would bring him above the social security wage base ($97,500) for tax puroses. So, the worst case scenario is that you get to keep 60% of the upfront money free and clear. Said another way, let's say you received a check for $500k and you paid the tax upfront (which would be a bad idea b/c you would be assured to hit the highest bracket) instead of over several years, 200K (40%) would go to the IRS and $300k (60%) would stay in your pocket. Assuming you can move your book in a timely manner, no less than 60% of the upfront money should stay in your pocket.
I think he is/was the top producer. I think he was going to do 8 this year, and yes, it is quite the team.
On a side note, Ferris Beuller seems quick to pounce on anybody for bad information. He should become some sort of cyber-cop.
[quote=WSxAG] I have a gorgeous office complex in a great part of town -but my net payout has been as low as 8.2% and as high as 43% . What doesn’t change is the the 5-figure office expense nut I have to crack every month. [/quote]
Sounds like the real problem might be overspending on your office and - I’m guessing here since you talk about recruiting being off - staff. Independents that effectively control these two key expense areas generally do very well financially; those who don’t … generally don’t do so well.
If my numbers are correct; 40K is $2400 for the first 10k and $15000 for the remainder - that’s $17,400 / 40,000 or 43.5%. Then add about 1% - 3% deferred. I probably will not grow revenue 15% this year so I’d add 1% deferred. I don’t have an occasion to do small tickets so that policy hasn’t really affected me.
I don’t do much in stock business and if I do, I usually don’t discount. I’ll try to make it as low of a cost as possible for people but you need to keep bringing in assets to be able to play that game (not much trading that is). But that’s what we’re supposed to be doing anyway.
I’m thinking the other major firms are in the 35% to 37& area. And that 5% extra does make a difference. Some of the other places - well you need a team of accountants to figure out the payout and they trim many things before the production even has a chance to hit a grid. I’ve found WB has been pretty forthcoming and transparent in that area.
By the way, my thought is 2 - 3 weeks on the outside for the announcement.
Here’s how the deal often works – $500K at 6% forgiven interest per year means $500,000 / 72 months is $6944.00 per month principal written off… And let’s say $140,000 phantom interest forgiven over 6 years is $1944 per month. So that’s $8,888 per month taxable fake income in addition to what you earn! The first months of the year your social security goes through the roof because your paying on all the fake income and it really hurts. After social security trails off, well, it still hurts! In this market you could end up living off of that note money. Loss of revenue from a switch in this environment can be substantial. You’ll lose a bunch of accounts in a good market. In a terrible one, who knows! You may have to rebuild and not be up to speed for a while. Granted, after this terrible year, you may have to rebuild to some degree anyway. Back to the numbers…
So $8888 extra fake income means you have to net about $5000 to pay taxes before you even start the month. However it takes $9000 in gross income to net $5000 which then goes to pay tax on the aforementioned fake income. At a 40% payout that means about $23,000 production per month is required just to break even! Given the phantom interest, you’re lucky to keep even 40% of the money you originally receive, And if you blow 80% of that money in the market or on stuff or on living before you pay the taxes, like many are inclined to do, you’re screewwwed!
If you quit or get fired, for any reason whatsoever, they’ll most likely sue you for the money and usually win! Check the arbitration data base under key word “promissory” and find out for yourself.
If you get fired and it not "for cause" you do not owe the money back in most cases..PRU in 2002 tried for awhile get get people they fired for lack of production and had awful results. Other firms policy is not to go after money when they fire or lay off brokers. Quitting is whole different story.Here’s how the deal often works – $500K at 6% forgiven interest per year means $500,000 / 72 months is $6944.00 per month principal written off… And let’s say $140,000 phantom interest forgiven over 6 years is $1944 per month. So that’s $8,888 per month taxable fake income in addition to what you earn! The first months of the year your social security goes through the roof because your paying on all the fake income and it really hurts. After social security trails off, well, it still hurts! In this market you could end up living off of that note money. Loss of revenue from a switch in this environment can be substantial. You’ll lose a bunch of accounts in a good market. In a terrible one, who knows! You may have to rebuild and not be up to speed for a while. Granted, after this terrible year, you may have to rebuild to some degree anyway. Back to the numbers…
So $8888 extra fake income means you have to net about $5000 to pay taxes before you even start the month. However it takes $9000 in gross income to net $5000 which then goes to pay tax on the aforementioned fake income. At a 40% payout that means about $23,000 production per month is required just to break even! Given the phantom interest, you’re lucky to keep even 40% of the money you originally receive, And if you blow 80% of that money in the market or on stuff or on living before you pay the taxes, like many are inclined to do, you’re screewwwed!
If you quit or get fired, for any reason whatsoever, they’ll most likely sue you for the money and usually win! Check the arbitration data base under key word “promissory” and find out for yourself.
Wow - after managing a successful branch for AGE 10 years, with 20% net margins when I left, why didn’t I consider office and staff costs? Thank you so much for pointing that out to me. Don’t know how I missed that one.
Of course those costs were considered, but under the hybrid we're attempting to set up a traditional branch with benefits of being indie. So obviously we needed to have a bit more space in order to expand. What I didn't count on was the worst market in three generations and that I would ultimately be competing for recruits with our traditional and our independent side. I can't tell you how frustrating it is to continually be in contact with a candidate, only to find out that they are being courted by another platform of our own company. Our cost structure is such that a couple $300k FCs (that we would pay 50% from first dollar), brings my net payout after expenses into the mid-60% range. To attract the MER, SB, AGE/WB folks we needed to provide an office environment similar to what they are leaving. Right business plan - wrong business environment - but in May 2007, two months before the first market peak above 14,000 - who knew? Still, don"t regret leaving AGE before the WACH hit the fan. Just have to figure out the best strategy going forward. (by the way - had our best month since we started in Nov.)You seem oddly indignant at the suggestion that your exceptionally low net is the result your business decisions concerning your office space and rent, while at the same time you acknowledge that your office expense is out of proportion to your revenue stream.
The issue isn’t if you considered office and staff costs - or if you successfully ran an AGE branch for 10 years, or if the current market is an abysmal one. The issue is if your current strategy is yielding acceptable results for you.
This is NOT a problem with the indy business model per se. That’s why I was puzzled that you warned “those considering the indy or quasi-indie, especially in this market
should think long and hard.” And that’s why I pointed out that nets as low as you have experienced are almost always the result of spending problems … spending in anticipation of future revenues.
You are far from the only one feeling this pain. You don’t have to look far to read the many cases of companies from all industries having to lay off staff and otherwise restructure or downsize in order to survive in the actual environment we are living in. That doesn’t make them or you bad or dumb - it just means you made decisions based on certain assumptions that proved to be wrong.
I agree you need to determine the best strategy going forward. And if as you say you “can’t compete” on the recruiting front with your current strategy, perhaps it’s because those who really WANT a wirehouse environment choose an actual wirehouse. If so, perhaps it’s time for a revised strategy.
Good luck.
Yes - I’m sure given the vibrant commercial real estate market my landlord will be more than happy to renegotiate the terms of my lease.
Pardon my sarcasm, I've done all three platforms, indie - 3yrs, wirehouse 20 yrs, and two in the hybrid model. Been successful in all three. At the end of the day its about the environment you want to work in. Net Payout - unless you work alone in a closet with no staff and no benefits - is going to gravitate back toward the mid 40 range. My business plan was based on a number of assumptions - most of which I could control, and have. However, when promises and commitments from the Home Office are not kept - there is little or no recourse. So perhaps you're right, its not the indie model per se, but how one expects to grow their business. My clientele is of a high net worth demographic and expects a certain office setting to walk into - and refer their friends to. I don't believe in luck.Yeah, why even consider any change in strategy when you’re already managing to net between 8% and mid 40’s%?
If that constitutes “successful” results in your opinion, you’re welcome to it.