What is the best firm?

29 replies [Last post]
billybob13's picture
Offline
Joined: 2008-02-28

What is the best firm to work for?  AG Edwards, UBS, ML, MS, Wacovia, Edward Jones, Smith Barney, or any others?  Which firm will give me the best chance for success overall?

Broker24's picture
Offline
Joined: 2006-10-12

There's no such thing as a "best firm" to work for. It all depends on your situation, what type of business you want, your location, the specific branch you would consider, etc. You can find many advisors at each firm that would claim their firm is the best to work for. It's all very subjective.

Ashland's picture
Offline
Joined: 2007-03-06

One that has your name on it...

Broker24's picture
Offline
Joined: 2006-10-12

Ashland wrote: One that has your name on it...

True, except I get the impression he is just starting out. Tough to start out Indy.

Insideman's picture
Offline
Joined: 2008-02-28

I come from a small RIA firm and there are two real differences I've noticed :1) At a smaller firm, or at least at mine anyway, upper level management will take more time to work with you to build your book. I'm not saying they're going to spoon feed you clients, but it has less of a sink or swim mentality. I know that after the first two years If I was a few million short of a quota I wouldn't be ousted instantly.2) As far as the best chance of success, earlier on I believe a small firm is the "safer" choice, since you have less of a risk of being jobless in two years. However, long term success I've notice seems to halt around $40 - $60 in AUM. Seems like most FAs have trouble getting past this. (Not sure why) My only guess, and this strictly a guess, is that bigger Wire House firms can gather up clients easier then small firms. Specially the HNW or UHNW clients.If you got a call from John Smith at Merrill Lynch who wants to look over your accounts, or John Smith at "Small Advisory Firm # 18".  Who would you be more likely to meet with first?Just my two cents.

Insideman's picture
Offline
Joined: 2008-02-28

Ice, would you say that is a mentality that each FA has personally, or is it something that firm "culture" sort of brings to the table?

Broker24's picture
Offline
Joined: 2006-10-12

iceco1d wrote:I would think that FAs that plateau at 40-60M AUM do so because of complacency; either subconsciously or by choice.  To get to that point, you are in the 10% that "make it" past 5 years.  That means, you've spent years busting your arse; whether that means paying for seminar dinners and watch plate-lickers eat (literally) away at your bottom line, or being told to STFU when cold calling, or kissing butt to gate keepers while door knocking...at the 40M AUM point (and up), you've "made it" - it's time to enjoy life...plus, with that much AUM, you should be able to get enough referrals to sustain a reasonable growth rate if you have half a brain. 
 
Ice, I think you are exactly right.  That is exactly what I see in my region at Jones.  In addition to that, many of the adivors are 2nd-career or 3rd-career FA's, so they may be in their late 40's and 50's (or older).  Once they hit about $100-125K in net income, they are satisfied, as they are only working 30 hours a week to do it.  Nice pay for a job you can coast with.  And like you said, once guys hit "critical mass" they sort of stop doing what they did to get there.

billybob13's picture
Offline
Joined: 2008-02-28

On average what does an FA make with $40M-$50M AUM?

Insideman's picture
Offline
Joined: 2008-02-28

I disagree. I get the impression that larger firms gather up our clients once they reach higher balances.
What appears to be happening is since our advisors pretty much take anybody as a client, they end up with literally thousands of clients. Its impossible to
establish a good relationship with
all of them.
Therefore, making it easier for bigger firms to get their business when accounts are large enough to meet there minimums.

Broker24's picture
Offline
Joined: 2006-10-12

iceco1d wrote:Billy, that is a  broad question.  Typically you estimate gross production @ 1% of AUm.  So in the 40M AUM scenario, you are looking at 400K in production.  At a wirehouse, you are probably looking at a 45-50% payout, with some other perks as well (so $180K - $200K in payout).  If you are Indy, or work for an Indy firm, your payout could be anywhere from 50% - 98% (although you pay your own expenses, etc.). 
 
Keep in mind, that 1% number is an estimate.  There are books that are all transaction based A-shares, that are only paying like 25 bps in 12b-1s for the most part.  That would put your gross production at 100K (and your payout could be as low as 50K).   Conversely, there are RIAs out there that charge 1.5%, 2%, or even 3% (although I've never seen it), so that would put gross production much higher. 
 
Use the 1% to estimate gross production on AUM, it works reasonably well.
 
It also depends on whether you are asking how much THOSE assets are producing, or how much that ADVISOR is producing.  An advisor that has amassed $40mm AUM in 3 years is probably out-producing the 12 year guy with $40mm, by a wide margin (as he is still in the active growth phase vs. the "auto-pilot" phase).  Also depends on how much insurance you do, as well as your ancillary income (i.e. at Jones you get profit bonuses, so it will depend on your office expenses, to a certain degree).

Roadhard's picture
Offline
Joined: 2007-02-23

Based on your first question, no matter where you start--be prepared to work your butt off for the next 3 to 5 years...a rookie is a rookie at all firms!  As far as your income--work hard, be honest, and do the right thing and you will make a very good living---don't do one of those and you might do well for awhile!  Good luck!

Insideman's picture
Offline
Joined: 2008-02-28

Why would you ever want to be in standard A shares? That sounds like shooting yourself in the foot. With a book that so transactional, god I don't even want to think about it.

Morphius's picture
Offline
Joined: 2007-07-21

Insideman wrote:Why would you ever want to be in standard A shares? That sounds like shooting yourself in the foot, With a book that so transactional, god I don't even want to think about it.The "why" is not so difficult.Option A: invest assets (say $100,000) using A shares, earn roughly 5% or $5,000 today.Option B: invest same $100,000 on AUM fee basis of, say, 1%, earn $250 this quarter, $1,000 this year.  By end of 5 years, (ignoring any change in value of assets) you 'break even' and earn the same $5,000 you could have earned up front.  Thereafter, you earn more.Probably the bigger question is how can some advisors manage to make the switch to fees, GIVEN these economics.  It takes discipline and a determination to opt for the AUM fee business model.  It's advantageous in the long run, but tough in the short run.  Some don't have the luxury of doing it, and some choose not to.For those of us who believe in it and pursue it AND manage to get over the difficult transition, it can be great.  But I certainly understand why many don't go this route.

Broker24's picture
Offline
Joined: 2006-10-12

Morphius wrote:
Insideman wrote:Why would you ever want to be in standard A shares? That sounds like shooting yourself in the foot, With a book that so transactional, god I don't even want to think about it.The "why" is not so difficult.Option A: invest assets (say $100,000) using A shares, earn roughly 5% or $5,000 today.Option B: invest same $100,000 on AUM fee basis of, say, 1%, earn $250 this quarter, $1,000 this year.  By end of 5 years, (ignoring any change in value of assets) you 'break even' and earn the same $5,000 you could have earned up front.  Thereafter, you earn more.Probably the bigger question is how can some advisors manage to make the switch to fees, GIVEN these economics.  It takes discipline and a determination to opt for the AUM fee business model.  It's advantageous in the long run, but tough in the short run.  Some don't have the luxury of doing it, and some choose not to.For those of us who believe in it and pursue it AND manage to get over the difficult transition, it can be great.  But I certainly understand why many don't go this route.

Boy, I for one would love to earn 5% on a 100K ticket. Sign me up for that fund family.

Insideman's picture
Offline
Joined: 2008-02-28

Broker24 wrote: Boy, I for one would love to earn 5% on a 100K ticket. Sign me up for that fund family.I never thought about home much more difficult AUM fees would be then a transactional based book. With that knowledge, therein lies the rub.Unfortunately I'm really naive to how AUM fees work, since currently everything is transaction, with mostly 12b-1 trails. I would guess that it's 25bps gross every quarter.

anonymous's picture
Offline
Joined: 2005-09-29

"Why would you ever want to be in standard A shares? That sounds like shooting yourself in the foot. With a book that so transactional, god I don't even want to think about it. "
 
A new person has to survive before they can thrive.  "A" shares can help them do it. 
 
 
 

Insideman's picture
Offline
Joined: 2008-02-28

Good information to have.

Morphius's picture
Offline
Joined: 2007-07-21

Broker24 wrote: Boy, I for one would love to earn 5% on a 100K ticket. Sign me up for that fund family.As I hope you know, I was oversimplifying with the "roughly" 5% figure simply to make the point about how A shares pay more now vs. AUM fees, rather that trying to be precise and get into break points and splitting between fund families and other details not critical to the main point about why someone would use A shares. 

Broker24's picture
Offline
Joined: 2006-10-12

Morphius wrote: Broker24 wrote: Boy, I for one would love to earn 5% on a 100K ticket. Sign me up for that fund family.As I hope you know, I was oversimplifying with the "roughly" 5% figure simply to make the point about how A shares pay more now vs. AUM fees, rather that trying to be precise and get into break points and splitting between fund families and other details not critical to the main point about why someone would use A shares. 
 
Yeah, I got it.  I was just being a wise a$$.  My point was that you don't even get 5% up front on most tickets.  I rarely drop tickets anymore that aren't hitting 100K breakpoints.

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

Insideman wrote: Broker24 wrote: Boy, I for one would love to earn 5% on a 100K ticket. Sign me up for that fund family.Most A shares I've seen are more likely around 4.25%, and have breakpoints after 100K.I never thought about home much more difficult AUM fees would be then a transactional based book. With that knowledge, therein lies the rub.Unfortunately I'm really naive to how AUM fees work, since currently everything is transaction, with mostly 12b-1 trails. I would guess that it's 25bps gross every quarter.
 
Every fund family I've ever seen has the first equity fund breakpoint at $50K.  A few of them have one at $25K.  Bond funds usually hit their first breakpoint at $100K. 
 
You said you work with an RIA, right?  But you also said everything is transactional and that they get mostly 12-b1 trails.  Those two things don't normally go together.  Aren't RIA's normally fee only advisors? 
 
Which ever route you choose to go, fees or transaction, the name of the game is still AUM.  The more you have the more you make. 

BondGuy's picture
Offline
Joined: 2006-09-21

iceco1d wrote:Billy, that is a  broad question.  Typically you estimate gross production @ 1% of AUm.  So in the 40M AUM scenario, you are looking at 400K in production.  At a wirehouse, you are probably looking at a 45-50% payout, with some other perks as well (so $180K - $200K in payout). 
 
$400K at a wire is 35 to 40%. Maybe low 40's at some. Income would be in the 150-160k range.

scrim67's picture
Offline
Joined: 2005-04-28

Roadhard wrote:Based on your first question, no matter where you start--be prepared to work your butt off for the next 3 to 5 years...a rookie is a rookie at all firms!  As far as your income--work hard, be honest, and do the right thing and you will make a very good living---don't do one of those and you might do well for awhile!  Good luck!
 
After three full years in my business I have about 25M AUM with about half of that annutized.   My gross production last year was right about 300k and my payout is about 33% since I work in a bank where payouts tend to be lower than most.
 
I purposely didn't kill myself building this practice simply because that is not my MO.  If I want to rationalize I can always say I've worked as hard as I've always have and I will continue to do that going forward.   My attitude is this a marathon and not a sprint.  Sure, I could have 30-40M AUM if I would've put in 50 hour weeks every week and worked every Saturday/nights.   Life is about balance and I love my leisure time.
 
scrim

Recon Scout's picture
Offline
Joined: 2008-04-01

Broker24 wrote: Ashland wrote: One that has your name on it... True, except I get the impression he is just starting out. Tough to start out Indy.
 
True.  That's exactly what I did over 2 years ago and now I'm looking for a place at the big firms.  The experience it provided was incrediblly valuable, but buidling my book suffered at the hands of administration, compliance, and accounting.

Insideman's picture
Offline
Joined: 2008-02-28

Recon Scout wrote:True.  That's exactly what I did over 2 years ago and now I'm looking for a place at the big firms.  The experience it provided was incrediblly valuable, but buidling my book suffered at the hands of administration, compliance, and accounting.Recon, just out of curiosity, were you part of a team at your Indy firm? Or on your own?

Recon Scout's picture
Offline
Joined: 2008-04-01

Insideman wrote: Recon Scout wrote:
True.  That's exactly what I did over 2 years ago and now I'm looking for a place at the big firms.  The experience it provided was incrediblly valuable, but buidling my book suffered at the hands of administration, compliance, and accounting.Recon, just out of curiosity, were you part of a team at your Indy firm? Or on your own?
 
After extensive research, I started my own IAR firm, began to build my book, and commenced managing portfolios.  There are days that I desire the structure of a large firm and, more recently,  the sales training (a weakness I'm currently working on remedying), but when I look at 100% of my fees hit my account I simply smile.  Though higher in the past, I've reduced my overhead to less than 5%, so I take home 95%. 

Please or Register to post comments.

Industry Newsletters
Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×