Sustainable ways to produce greater than 1% on your assets?

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series7taxguy's picture
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Joined: 2010-07-16

Just curious what everyone's percentage production is relative to AUM. What strategies have you used to increase this that don't canibalize future production on specific assets?

BigFirepower's picture
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Joined: 2010-07-09

Run more than 75-85 bps, and you're pushing it. Either the client is taking more risk, or you're taking more risk in losing that account by pushing ROA beyond 85 bps. That might change, but it would require seeing a yield curve that goes from 4% on the short term, 8% or higher on the long end. Fixed income where it is at right now, has squeezed out profit margins to a very significant degree. Give me a prosepect with a managed account right now, paying say 1% fee, with 40% in fixed income. I'd have that account transferred over in no time flat.

squash2's picture
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Joined: 2010-03-09

I completely disagree..Undercutting people on asset fees is a stupid way to do business.. and it makes our industry closer to the insurance industry where they just compete on price..The fee that I charge is for my advice, strategy and expertise, it doesn't depend on what assets you hold, though I do give discounts for the amount of asset I manage.I think it also depends if you are indy,ria or wirehouse.. most ria's won't charge below 1.00% unless the assets are $5MM+.. indy's discount to try to steal accounts or based on what fee they have to pay to their b/d.(example: fee based platorm fee is 38bps, so they charge 1.38% so they can net 1%)...wires/banks charge whatever the company says..

BigFirepower's picture
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Joined: 2010-07-09

Well, whatever works. I'm by no means typical. I run as old school a business as I can. I'm such a dinosaur, I even do stock trades and individual bonds!? Imagine that...  

N.D.'s picture
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Joined: 2009-07-14

squash2 wrote:...The fee that I charge is for my advice, strategy and expertise, it doesn't depend on what assets you hold, though I do give discounts for the amount of asset I manage...Not a stab at you personally Squash, I thought the same thing once also. But if your advice, strategy and expertise is so good why do you not trade your own account and do away with clients? We are salesmen plain and simple. Some just choose to market themselves in different ways.

Sportsfreakbob's picture
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Joined: 2008-08-24

N.D. wrote:squash2 wrote:...The fee that I charge is for my advice, strategy and expertise, it doesn't depend on what assets you hold, though I do give discounts for the amount of asset I manage...Not a stab at you personally Squash, I thought the same thing once also. But if your advice, strategy and expertise is so good why do you not trade your own account and do away with clients? We are salesmen plain and simple. Some just choose to market themselves in different ways.N.D. -no personal offense meant, here, you're comment is wrong to me. You are correct, if your post implying that its all about performance is correct. But if you build your business on lowest fees, best performance, you are building a house of cards.I charge my clients 1.5% on the first 500k, then go to 1.25% on the next 500k. I have lost 2 clients in the last 4 years. Neither because of price or performance. Its about service and about doing other stuff for them-positioning yourself as their advisor. If your comment about "if you're so good, why aren't you just trading for yourself" is based on the assumption that his clients are paying for performance. Nobody does that anymore, investments are a commodity.At the end of every review, i ask the client "is there anything i am not doing that i should be, or should be doing more of" and they all answer that they are real happy with the level of service i provide and with the way things are going in general. And trust me, while i think i am as good as most on this board at managing money, I am not exactly knocking the cover off the ball 

N.D.'s picture
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Joined: 2009-07-14

Sports - I think you misunderstood what I meant. If you only provide something to your clients (i.e. advice, strategy and expertise) that an advisor can provide on the other side of the country then you are likely going to be replaced by someone else. The big advantage an advisor must capitalize on now is what they can do outside of the "advice" box. Like I said we are simply salesman, we only sell ourselves now. Q - What is the only thing you can provide that an advisor in another town cannot? A - Yourself. It is only about the relationship any more, not advice, not strategy and not expertise. What can you do to deepen and strengthen the relationship? The future of advisors may drift toward the type of people that have a passion for "making people feel good about themselves" aka a relationship manager. When this does happen, which I think is already taking place, it will make the financial rewards of being a "run of the mill advisor", obsolete (see the "advisors" at the retail chains - Fidelity, TD, Schwab, Scottrade).  I do think it will benefit the small indies/RIAs though. There will be less desire to "push" the relationships to grow revenue and more of a desire to build your own practice. Definition of Relationship ManagerBy Jonathan Roe, eHow Contributor A relationship manager is more than a glorified salesman. She's responsible for establishing a relationship, maintaining it and deepening it. A good relationship manager builds so much customer loyalty that the client always gives her the first shot at any new business--and, all else being close to equal, will ultimately award the new business to her because of that longstanding relationship.http://www.ehow.com/about_5104627_definition-relationship-manager.html#ixzz12dL0axrOrelationship business

Sportsfreakbob's picture
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Joined: 2008-08-24

OK, we are on the same page on that. The relationship is everything. Thats a great question for discussion - i won't say too much here because i don't want to hijack the thread. Maybe you should start another thread on this. (maybe in another place as well, like AH) I'll only comment here that the way you start to establish the kind of relationsip that allows you to keep your clients and keep your fees up is to learn as much as you can as possible about your clients, on a very personal level, go way beyond their account statements and their financial plan 

N.D.'s picture
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Joined: 2009-07-14

To get back on topic, the only "real" way I see to sustain greater than 1% on assets is to incorporate commish business with the fee i.e. insurance (life, disability and LTC.). Thus the importance of comprehensive financial planning.

I am legend's picture
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Joined: 2010-03-04

IMO there is really no way to consistently go over 1% ROA unless you are a fee only advisor charging everyone over 1%.  Firms tend to want you over the average ROA of around .65%, but don't want you to be too high as well and over 1% is considered high.  I would shoot for .75% ROA on an ongoing basis and you will do well.

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