Someone else's office or pay own expenses?

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xbanker's picture
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Joined: 2007-01-21

I'm curious about how many of you pay your own expenses for a platform (lpl, etc) regardless of from home or not and how many run your practice out of another indy branch to reduce costs. For either, what led to the decision? (Please state what BD you're with.) For those who use another office, I have a few questions:

-What % cut does the branch location take beyond the BD payout grid?

-Do you still get to choose your own firm name and business structure (Joe's securities, llc and seperate eligibility for sep or whatever other plan you want) or in essence run "under" the branch?

-Do you have access to any sales assistant or other shared support?

-Do you in your specific situation have a written documentation that you own your practice without non-compete of any kind?

As you can see, I'm deciding if I should start from home with an indie BD at the end of the year or find a branch and avoid some of the hassle. I should state I want absolutely NO "management" beyond compliance requirements that would be present anywhere. Your thought/experiences appreciated.

Morphius's picture
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Joined: 2007-07-21

Neither.  The way you pose your choices leads me to believe you may not fully understand the full range of options available.  If so, you are in good company - the term "independent" or "indy"as used in this industry has essentially been co-opted and rendered about as ambiguous, at its core, as "financial advisor."  It can mean so much, that it ends up having little useful meaning.More specifically, your question seems to begin with the premise that you want or need to affiliate with a b/d.  That may or may not be the case, depending on the way you want to do business.  But before you start limiting your comparison to these two choices, make sure you have excluded the other options because they don't fit your needs rather than simply because you aren't aware of their existence.  When you say you want "absolutely no management beyond compliance requirements" it leads me to ask why you apparently aren't considering the full independence of an RIA as opposed to the partial independence of a b/d, albeit an "independent" one.If you have you intentionally narrowed your focus to your stated choices on purpose, that's fine.  Otherwise you might want to explore your full range of options before narrowing your focus.

Anonymous's picture
Anonymous

xbanker wrote:I'm curious about how many of you pay your own expenses for a platform (lpl, etc) regardless of from home or not and how many run your practice out of another indy branch to reduce costs. For either, what led to the decision? (Please state what BD you're with.) For those who use another office, I have a few questions: -What % cut does the branch location take beyond the BD payout grid?
 
35% branch, 15% bd, 50% me.  The 35% to the branch declines with production down to 20% [on a regular scale - I'm sure it's negotiable past 20% if productions warrants it...if not, LPL, RayJay, and Commonwealth are always looking for more AUM ).
-Do you still get to choose your own firm name and business structure (Joe's securities, llc and seperate eligibility for sep or whatever other plan you want) or in essence run "under" the branch?
No, the office name stays the same (which in my case, is also the BD name).  I consider myself "affiliated with Joe Shmoe investments, and work out of the Nowheretown branch." 
 
I am however, 1099'd and paid directly by the BD, so I am eligible for whatever small biz retirement plan (and other bene's) I want (SEP, SIMPLE, Single K, etc.). 
-Do you have access to any sales assistant or other shared support?
Yes.  Office and furniture is provided, along with internet & phone, etc. (no computer).  I also get access the SA.  There is a receptionist, copier, conference rooms, etc.  The branch even pays for some seminars out of pocket, but all of this stuff is surely a case by case decision - you can't extrapolate what your situation might be based on mine.   I've heard of plenty of people paying rent to affiliate with an indy office, etc.  Just depends.
-Do you in your specific situation have a written documentation that you own your practice without non-compete of any kind?
You don't need a contract that says you don't have a non-compete/solicit.  If you DON'T have a non-compete or non-solicit...then it's pretty simple; you don't have one. 
As you can see, I'm deciding if I should start from home with an indie BD at the end of the year or find a branch and avoid some of the hassle. I should state I want absolutely NO "management" beyond compliance requirements that would be present anywhere. Your thought/experiences appreciated.
 
You'll probably want to affiliate with an existing office for the simple reason that:  Most credible BDs won't let you startup with 0 AUM.  Don't get me wrong, you can still do most of your work from home, but you should still affiliate with a real office. 
 
The 35% I pay is well worth it to be with a [quazi] real BD instead of Primerica or some garbage firm like that.  Plus it's nice to be able to meet clients in a location other than your kitchen (or theirs).
 

norway401's picture
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Joined: 2007-10-16

XBanker - An example of a Canadian situation. Independent Contractor Status versus employee:
1) Private Office - 6422.00 per annum
2) Technology - 1950.00 per annum
3) E & O Insurance - 1000.00 per annum minimum dependent on coverage
4) Admin. Support - Purchased in Five ( 5 ) Hour Blocks
5) Other Expenses - you determine.
 
Payout @ 50 % plus other incentives based on production levels plus renewals , trailer fees etc. , also dependent on product category.
Access to company medical plan , stock option plan, pension plan and other perks. By definition under Canadian Law you are an Independent Contractor ( self-employed ) but you are identified by the Company Name.
The percentage payout in reality becomes less as your production levels increase.

babbling looney's picture
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Joined: 2004-12-02

xbanker wrote:I'm curious about how many of you pay your own expenses for a platform (lpl, etc) regardless of from home or not and how many run your practice out of another indy branch to reduce costs. For either, what led to the decision? (Please state what BD you're with.) For those who use another office, I have a few questions:
 
I pay all of my own expenses. You would have to pay for the platform no matter where you worked.....home or an office.-What % cut does the branch location take beyond the BD payout grid?
 
My own office. B/D takes 10% OSJ (in a separate office) takes 10%.  If I was my own OSJ then it would be a 90% pay out instead of 80%.  Not worth the extra hassle for me right now.  Maybe later.
-Do you still get to choose your own firm name and business structure (Joe's securities, llc and seperate eligibility for sep or whatever other plan you want) or in essence run "under" the branch?
 
I use a DBA and reference the B/D that I'm affiliated with fairly prominently.   You have to disclose who your B/D is even if you are using a DBA.   "Babbling Looney ....The Babbling Investment Company.  Investment Advisor Representative of and Securities offered through the XYZ Company.  blah blah blah other required disclosures.."  The parent company does a lot of national advertising and ....hey...why not take advantage of their money.  I operate as an S-corp.  Not really sure what you are asking here.-Do you have access to any sales assistant or other shared support?
 
I hired a part time non licensed (contractual) employee to cover the phones and take messages when I'm gone.  Not really my employee, so I don't have to deal with FICA and all that other stuff.  She is contracted by the hour.   My OSJ shares a receptionist with a group of other professionals in the building she is in.   You can do it anyway you want.  Some people don't have a sales assistant at all.  Others share the work with a licensed associate as a team.-Do you in your specific situation have a written documentation that you own your practice without non-compete of any kind?
 
Nope.  No need. No non compete. No contract.As you can see, I'm deciding if I should start from home with an indie BD at the end of the year or find a branch and avoid some of the hassle. I should state I want absolutely NO "management" beyond compliance requirements that would be present anywhere. Your thought/experiences appreciated.
 
Well, that's what being Independent is all about.  No one tells me what products I must use.  OF COURSE there is all the compliance and other reporting.  Probably more so because of the indy set up.  But other than that I do what I want.
 

xbanker's picture
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Joined: 2007-01-21

That sounds like a good set up Babbling Looney. A guy who used to work at my current firm has an LPL office and said he'd cover all the LPL related fees and reasonable access to his SA and office equipment for 10bps. With LPL taking about 10bps on most products I'd net roughly 80% and be responsible only for licensing registration, continuing ed, E&O and whatever optional biz related expenses. This sounds like a good deal although we didn't go over that many specifics yet. I want the cfp out of the way in either November or March before pulling the trigger and am using the interim few months to choose the right course of action. I just want an effective platform with next to no hassle to run my DBA through and pay a reasonable amount off the top. Is the OSJ a hassle to you because you'd need to get a 24 or additional compliance issues?

Anonymous's picture
Anonymous

xbanker - take your deal, it's a good one.  don't wait for the cfp.  being your own osj is a bitch for both a) compliacne and b) s24...not that either are hard, but for 10 bps is it worth it for you, is the question.  fuck capitalization.

babbling looney's picture
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Joined: 2004-12-02

iceco1d wrote:xbanker - take your deal, it's a good one.  don't wait for the cfp.  being your own osj is a bitch for both a) compliacne and b) s24...not that either are hard, but for 10 bps is it worth it for you, is the question.  fuck capitalization.
 
I'm not an OSJ (office of supervisory jurisdition) because it would just be too much trouble, extra paperwork and responsibility for other people's screwups.  Now then,  if I were to supervise several offices and take a 10% rake off of other producers who were making some nice grosses, it might be worth my while.   As it is.....my current OSJ and I get along just fine and I don't mind paying 10% of my income to let her take the trouble.   It's worth it to me

Cowboy93's picture
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Joined: 2005-05-10

If you're going to be indy or semi-indy, or work at a regional, or a wire, or a insurance B/D, or...
...you should probably learn what a "bp" is.  I suspect no one is going to be your OSJ for 10 bps.  If you mean 1000 bps, that is quite a different number and I hope your clients don't catch on to your lack of understanding of how decimal points work.
If you meant what you said, that guy/gal is going to have lots of people knocking on his/her door to sign up.

Anonymous's picture
Anonymous

I'm in full agreement with you Babs.  100%
 
Cowboy, you can stop being a douche anytime.

xbanker's picture
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Joined: 2007-01-21

Cowboy (I assume in the brokeback mountain sense...) what I meant is that If I'm grossing about 1% off my AUM, he'd get about 10% of that, hence 10bps on my AUM. A rough figure. 10% of production payout if you want to be technical about it. (I hope to increase my payout beyond 1% of AUM with additional options once indy anyway...)

 
Icecold, I agree the deal is good. I intend to do it. I just have a bonus payout that will hit at the end of the year anyway plus 401k vesting, so will just use that opportunity to get the CFP out of the way before jumping ship rather than deal with that during the hectic time when the transition occurs. The one thing this forum has taught me is that Indie is the only way to go for someone serious in this business who doesn't want to be someone else's "employee." I will never even look at a wire house, insurance firm, discount firm, bank, etc. etc. etc. again. 
 

Indyone's picture
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Joined: 2005-05-31

iceco1d wrote:xbanker - take your deal, it's a good one.  don't wait for the cfp.  being your own osj is a bitch for both a) compliacne and b) s24...not that either are hard, but for 10 bps is it worth it for you, is the question.  f*ck capitalization.
 
I agree...I sure wouldn't offer that good of a deal.  I wouldn't even OSJ you for 10%, much less provide space, an assistant and cover expenses.  You'd better take the deal before your guy starts reading this forum.

PinBroker's picture
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Joined: 2007-06-17

X...
 
I jumped to LPL just a couple of months ago and got pretty much the same deal...LPL gets 10% then my OSJ gets 10%...my OSJ has been in the business for 14 years.  That was the best offer I had (by far).  Most OSJs wanted a 25%-35% cut.
 
With that 10% that goes to my OSJ, I get a private office, a common receptionist, pt assistant, internet, copier, fax, desk, etc.  I also got to set up my own DBA  (I set up a LLC) but we use the LPL logo for simplicity sake. The only big expense was I bought a computer, Blackberry, and a better office chair.  For that override I simply couldnt pass it up and some of the LPL recruiters were "shocked" at such a honey of a deal.
 
Feel free to PM me if you need more information.   Also, the CFP, in my opinion is definately worth it.  I would suggest you get it BEFORE you go indy.
 
PIN
 
 

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