Production vs AUM

5 replies [Last post]
Jay L's picture
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Joined: 2010-04-29

Hi,Can someone please explain the term "Production" level?How is it calculated?What percentage of it does a Rep will receive as net remuneration? Wirehouse? Indy?What is considered a low production level? Average? Above Average?Can this concept be applied to RIAs as well, or strictly to commission based reps?Also is having X $ amount of AUM applicable to reps as well or only RIAs?Is it correct to say that reps performance is judged by their production level and RIAs by their AUM?Thanks

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

Gross production is simply all of the fees and commissions that you produce.AUM and production are important.  The average ROA is .65%.Wire you get about 40% of gross productionIndie about 80-90%, but you pay your own expenses.

newguy44's picture
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Joined: 2008-08-29

At a wire you get 30 to 34% in your first 5 years.

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

Not at WFA....They give a higher payout in the first few years.

RealWorld's picture
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Joined: 2009-07-13

Production level is explained well by Legend.The term net remuneration is foreign to me but in layman's terms is the amount that we get paid as a percentage of gross production... I would say again legend explained it well.I really don't know what is considered a low production. I guess that I would assume low production would be anything under 200. Average at maybe 400 and above average maybe 700.I also think that amount of pay that you bring home is obviously a goal of any financial services office. I don't know that it is any different for RIA or commission reps.In my opinion AUM is the largest but not only factor in actual production no matter where you work. We all build books (or peter our way into one from Daddy) so the goal of having a large AUM should be universal but second to having a large production number and IMO these both should be behind doing good work for your clients(and them actually making money), but generally that is the third most worried about performance evaluation. I was under the impression that a .65% ROA was low, any thoughts on this?

B24's picture
B24
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Joined: 2008-07-08

0.65% ROA is such a shot in the dark, there are so many variables.  For example, if you are fee-only (or fee-based with primarily fee-income), it is probably closer to 1% (or even slightly higher).  If you are a primarily commissioned broker, or have a mix of both, then the variable will be how fast you are adding assets and the size of your existing book (i.e. adding $5mm in commissioned assets @ 2.5% to an existing book of $5mm will give you a huge ROA THAT year), as well as the size of your book.  If you have a $100mm book, primarily stocks and bonds that are commissioned, then your ROA will be contingent on what you are adding, and how much yo turn your existing book.  Typically, bond portfolios shouldn't be turning over very frequently.  This is why many mature Jones books have very low ROA's - because they have lots of stocks, bonds, and A-shares collecting 25 Bips.  But once you get to "critical mass" with your book, things just naturally happen (clients find money, retire, rollover, buy insurance, refer friends, etc.).  You will also might add ancillary services (insurance), that do not correllate to your assets.

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