Wirehouse Fee Schedules

35 replies [Last post]
NEVER_proprietary's picture
Joined: 2009-12-02

Hi,
 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so excuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.

badmove?'s picture
Offline
Joined: 2006-06-10

1-3%

NEVER_proprietary's picture
Joined: 2009-12-02

badmove? wrote:1-3%
 
What are the breakpoints? is this for bond or stock accounts? Do yo know which firms are charging what?
 
thanks

NYCTrader's picture
Offline
Joined: 2009-11-20

NEVER_proprietary wrote:Hi,
 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.Do you run discretionary portfolios?  Are you independent or do you work at a wirehouse?  If you are an indy and running non-discretionary portfolios, the ticket charges could really kill your margins (especially if your clients like to trade a lot).  Also, do you plan to charge for holding cash?  Some wirehouses won't let you do that (or they cap the % cash position you're allowed to bill on). 

NEVER_proprietary's picture
Joined: 2009-12-02

iceco1d wrote:My firm is (basically), 1.5% up to 100K, 1.25% on the next 400K, 1% on the next 500K (so you're at $1MM at this point), and 80 bps on anything over $1MM.Personally, I think anything higher than 1.5% is a rip off, especially if it's just for plain vanilla asset allocation, even if it's ETFs.  If you're using options, or managing individual securities and eating the ticket charges, then maybe 1.75% or 2% could be applicable for smaller accounts.I think EDJ's most expensive fee, non discounted, for the smallest accounts, maxes out at 1.35%.  I think fees in general are going to keep coming down.  Also, keep in mind...you should NOT be presenting a wrap fee is a "fee in lieu of commission, in exchange for unlimited trades."  In a fee account, the fee is for your ADVICE, not for the product you are selling, or the transactions you're doing.Good luck.
 
 
80bps for accounts over 1mm, is that the reps share or is that the total charge on the account? I've seen brinker, fundquest, curian capital fees and there is a total fee to the client and then the rep splits it with the fund/portfolio manager.
 
So charging clients 3% on 100k accounts for managing their individual securities is too much for most wirehouses?
 
I would charge a fee which would not include ticket charges. Most of my advice would be for individual securities. Fee for advice or fee for trades, at the end of the day what's the difference.......you're paying for something.

NEVER_proprietary's picture
Joined: 2009-12-02

NYCTrader wrote: NEVER_proprietary wrote:Hi,
 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.Do you run discretionary portfolios?  Are you independent or do you work at a wirehouse?  If you are an indy and running non-discretionary portfolios, the ticket charges could really kill your margins (especially if your clients like to trade a lot).  Also, do you plan to charge for holding cash?  Some wirehouses won't let you do that (or they cap the % cash position you're allowed to bill on). 
 
I'm indy and non- discretionary at the moment but that will change as soon as I get the hang of fee based business. I will not charge to hold cash but I will have to double check with my firm to be 100% certain.

NEVER_proprietary's picture
Joined: 2009-12-02

Ok,
 
So how much does your firm charge as an advisory fee on accounts that are mostly geared towards individual securities trading?

aeromaks's picture
Offline
Joined: 2007-01-13

Are you talking about a fee based investment advisory account or a fee based  brokerage account that is client directed?cause if it is the later... alot of wirehouses got into big troubles with regulators over those accounts. mainly old ladies paying $2k a year and do no transactions.  UBS insight one.

SFEZ's picture
Offline
Joined: 2008-10-25

NEVER_proprietary wrote:Hi,
 
I'm breaking into the fee based/wrap accounts industry after a nine year career as a commission based stockbroker.  I have an idea of how I would like to run my new business model although I am still ignorant so exuse my mundane questions.
 
I would like to charge a flat fee for unlimited transactions within my clients account,  e.g. clients sends me 100k s/he then receives unlimited trades...stocks, muni's, options, etc. I would charge 2% or $2,000 a year for this service.
 
I have no idea what other firms are charging their clients for wrap accounts/managed accounts. Does anyone have a grid of some popular firms fee schedule?
 
Thank you for reading and any info would be greatly appreciated.

 
You are mixing 2 types of accounts.......
 
Unlimited trades for a set fee - If the account is over 500K, you won't be competitive if you are over 1%...........If under that, I try to go with 1.5%......But, sometimes I need to do 1 or 1.25% to  be competitive.....
 
Managed Money - Putting the money with money managers......usually 100K minimum per manager (250K minimum for muni managers).......You can go from 1.5 to 3.....They usually keep around 1/3 of it and you get the rest to your grid......So, charge 1.5, give up .5 and keep 1%......

SFEZ's picture
Offline
Joined: 2008-10-25

aeromaks wrote:
Are you talking about a fee based investment advisory account or a fee based  brokerage account that is client directed?

cause if it is the later... alot of wirehouses got into big troubles with regulators over those accounts. mainly old ladies paying $2k a year and do no transactions.  UBS insight one.

 
The wirehouses changed the language in the contract to set it up as an advisory account.......So, the client is paying for the advice instead of the trades.....
 
That being said......I'm sure there are still potential problems if they are paying the fee and not doing any trades......

NEVER_proprietary's picture
Joined: 2009-12-02

sfez wrote:
 

 You are mixing 2 types of accounts.......
 
Unlimited trades for a set fee - If the account is over 500K, you won't be competitive if you are over 1%...........If under that, I try to go with 1.5%......But, sometimes I need to do 1 or 1.25% to  be competitive.....
 
Managed Money - Putting the money with money managers......usually 100K minimum per manager (250K minimum for muni managers).......You can go from 1.5 to 3.....They usually keep around 1/3 of it and you get the rest to your grid......So, charge 1.5, give up .5 and keep 1%......
 
 
  I guess what I'm describing is a managed account where I am the money manager too.
I don't want some other financial professional touching or dictating how and where to invest my clients funds. I would maintain the client/broker relationship and manage the money (on a non-discretionary basis while I'm just starting out) while charging a fee in return for this service/advice. I love managing money and this way I wouldn't have to give 1/3 of the fee away.
 
My managed account minimum would be 50k, if the client wants to test out my performance they are welcome to open a smaller commission based account and later convert to fee based when reaching the 50k mark.
 
Am I missing anything or is there any advice you could give?
 
Thank you
 
 
 

Wet_Blanket's picture
Offline
Joined: 2008-11-13

I know Raymond James has two options:
 
Passport:  Client pays a fee (negotiable) for ADVICE, but pays ticket charges ($30 for equities / $50 Fixed Income).  Acct Minimum:  $25,000
 
Ambassador:  Client pays a fee (negotiable but usually higher than Passport) for ADVICE.  If you are with RJFS, then the client gets 50 free trades a year (if they haven't changed this), then above that either the client pays the Passport schedule or the FA does.  If with RJA, the client has free trades with no limit (probably due to the higher cut the firm gets from those FAs compared to RJFS).
 
So this is doable, on a non-discretionary basis.  You don't have to get into the nuances of the Merrill Rule - just make sure that your clients are better off in a fee based account instead of a commission based account.

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

When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.
I think you might be a little confused.

Wet_Blanket's picture
Offline
Joined: 2008-11-13

B24 wrote:When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.
I think you might be a little confused.
 
For the RJ platforms, they can be discretionary or non-discretionary - and it is unlimited trades (but I assume at somepoint the client would get kicked out if the level of trading is insane).  What happened with the Merrill Rule is that brokers were doing this, for a fee - which isn't allowed.  If you are an IAR, then you can in an advisory platform with an advisory arrangement.  When the Merrill Rule came down, RJ had to pay alot of money for doing this - so they have their T's crossed and I's dotted on this one.

Northfield's picture
Offline
Joined: 2007-04-10

From a client's perspective 1% to 2% is an acceptable range depending on size of account and strategies/services provided.
 
But that cost to client is different depending on platform.
 
2%, if trades, account fees, etc, are included is acceptable.
 
If they are not, probably 1.5% is the upper limit.

chief123's picture
Offline
Joined: 2008-10-28

iceco1d wrote:My firm is (basically), 1.5% up to 100K, 1.25% on the next 400K, 1% on the next 500K (so you're at $1MM at this point), and 80 bps on anything over $1MM.Personally, I think anything higher than 1.5% is a rip off, especially if it's just for plain vanilla asset allocation, even if it's ETFs.  If you're using options, or managing individual securities and eating the ticket charges, then maybe 1.75% or 2% could be applicable for smaller accounts.I think EDJ's most expensive fee, non discounted, for the smallest accounts, maxes out at 1.35%.  I think fees in general are going to keep coming down.  Also, keep in mind...you should NOT be presenting a wrap fee is a "fee in lieu of commission, in exchange for unlimited trades."  In a fee account, the fee is for your ADVICE, not for the product you are selling, or the transactions you're doing.Good luck.
 
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 

Wet_Blanket's picture
Offline
Joined: 2008-11-13

chief123 wrote: 
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 
 
Slightly ontopic - how do you handle a client that wants to put a couple of positions in their managed account?  Is it a strict no or do you allow positions to be held below the line?

NEVER_proprietary's picture
Joined: 2009-12-02

B24 wrote:When you say "unlimited trades", do you mean the client is calling in the trades, or you are?  If you jsut give the client unlimited trades, and let them go at it, I think that flies in the face of a fiduciary fee-only advisory account.  AND, you have to somehow limit ticket charges.  What you are describing is an old "Merrill-Rule" style fee-in-lieu account, which have essentially been banned.
I think you might be a little confused.
 
When I say unlimited trades it's meaning is dependent on the clients objectives and all trades are solicited. Some clients will buy a few funds and hold them for years others may trade the stock market weekly others may trade bonds quarterly...... All I'm saying is I want to charge a fee for my advice....my advice for each client will differ on their investments objectives.

chief123's picture
Offline
Joined: 2008-10-28

Wet_Blanket wrote:chief123 wrote: 
I charge:
100-250k 1.50
250-500 1.25
500-1MM 1.00
1MM+ 0.75
 
Discretionary Includes unlimited trading(client doesnt get to trade)and cash positions.... As long as the cash position is part of the strategy, if it is just cash it is kept in a different account.
 
 
Slightly ontopic - how do you handle a client that wants to put a couple of positions in their managed account?  Is it a strict no or do you allow positions to be held below the line?
 
Current platform doesn't allow me to hold between the line...
 
What do you mean by clients want to put a couple of positions in their managed account? Do they want to buy something? Xfer something in? In most cases all security assets are part of the strategy so they get billed the same.

Wet_Blanket's picture
Offline
Joined: 2008-11-13

There is the occasional client that wants to hold something that isn't in the investment model.  Drives me crazy from a compliance/liability perspective.

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

Chief, I think he means, for example, what if they have 50K in company stock that they don't want to part with (regardless of your recommendation or strategy), and you are managing 500K with your own "strategy".  Can they just hold the stock in the account while you manage the rest for a fee.

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

Wet_Blanket wrote:There is the occasional client that wants to hold something that isn't in the investment model.  Drives me crazy from a compliance/liability perspective.
 
Can't they just sign a waiver/acknowledgement letter?

chief123's picture
Offline
Joined: 2008-10-28

B24 wrote:Chief, I think he means, for example, what if they have 50K in company stock that they don't want to part with (regardless of your recommendation or strategy), and you are managing 500K with your own "strategy".  Can they just hold the stock in the account while you manage the rest for a fee.
 
Again it depends.. I had some clients with clients with some large company stock holdings and we wrote covered calls to decrease the position and create income off of it.
 
But if they are going to never sell I open another account, and hold it there(has never happened before though)
 
Disclaimer: Most of what I deal with is qualified

Wet_Blanket's picture
Offline
Joined: 2008-11-13

B24 wrote:Wet_Blanket wrote:There is the occasional client that wants to hold something that isn't in the investment model.  Drives me crazy from a compliance/liability perspective.
 
Can't they just sign a waiver/acknowledgement letter?
 
Currently we strongly discourage / tell them to open a retail account.  But when it does happen, we will tell them that we will not manage the position, will not bill on it, and will not even be able to view it (because we put it below the line).  We give them the impression that if the stock tanks, we will do nothing about it.  We discuss this with them, and send a letter of confirmation.
 
I would rather just never allow it....ever.
 
I have more client situations that drive me crazy too - if interested.

NEVER_proprietary's picture
Joined: 2009-12-02

So does anyone know if, how and where I can begin to learn about becoming the money manager and the FA so I can capture 100% of the fee charged to the client?

Wet_Blanket's picture
Offline
Joined: 2008-11-13

Form your own RIA.

SFEZ's picture
Offline
Joined: 2008-10-25

NEVER_proprietary wrote: sfez wrote:
 

 You are mixing 2 types of accounts.......
 
Unlimited trades for a set fee - If the account is over 500K, you won't be competitive if you are over 1%...........If under that, I try to go with 1.5%......But, sometimes I need to do 1 or 1.25% to  be competitive.....
 
Managed Money - Putting the money with money managers......usually 100K minimum per manager (250K minimum for muni managers).......You can go from 1.5 to 3.....They usually keep around 1/3 of it and you get the rest to your grid......So, charge 1.5, give up .5 and keep 1%......
 
 
  I guess what I'm describing is a managed account where I am the money manager too.
I don't want some other financial professional touching or dictating how and where to invest my clients funds. I would maintain the client/broker relationship and manage the money (on a non-discretionary basis while I'm just starting out) while charging a fee in return for this service/advice. I love managing money and this way I wouldn't have to give 1/3 of the fee away.
 
My managed account minimum would be 50k, if the client wants to test out my performance they are welcome to open a smaller commission based account and later convert to fee based when reaching the 50k mark.
 
Am I missing anything or is there any advice you could give?
 
Thank you
  
 
Some firms have a minimum account balance and a minimum charge on these types of accounts........So, they may allow $50,000 and up, but they may require the minimum fee to be $1,000 annually......
 
For example, $1500 or 2%, whichever is less, on accounts.......
 
Most firms charge quarterly.........on either a quarter end balance or on an average month-end balance during the quarter.........
 
I like these accounts......BUT, you have to be careful of 2 things:
1- Traders who will take up a ton of your time, call you to enter trades for them regularly, and possibly blow themselves up when they are wrong, or when we hit a correction.....
 
2- The accounts who never make a trade and wake up a year form now and want out, since they paid a fee and hardly traded........
 
Also, anytime there is market volatility and statement values go down month after month, clients get upset over the quarterly fees.......since they are losing money...
 
Just some random thoughts on the stuff.....
 
Good Luck.....
 

NEVER_proprietary's picture
Joined: 2009-12-02

 Thanks for the reply. I'm ok with with traders calling in because they rarely do. I guess it's because whenever my clients call I ask for more money.
I'll be honest if a client make no trades for the year I'd call the client and fire them because I'm really not interested in feeling like I'm taking money from someone.
How do you handle a situation where the account value keeps decreasing and they bring up the fee?....I would think it would be worse on a commission based account because the overall charges would be higher a year. I charge atleast 2% per transaction.
 
    
 
Some firms have a minimum account balance and a minimum charge on these types of accounts........So, they may allow $50,000 and up, but they may require the minimum fee to be $1,000 annually......
 
For example, $1500 or 2%, whichever is less, on accounts.......
 
Most firms charge quarterly.........on either a quarter end balance or on an average month-end balance during the quarter.........
 
I like these accounts......BUT, you have to be careful of 2 things:
1- Traders who will take up a ton of your time, call you to enter trades for them regularly, and possibly blow themselves up when they are wrong, or when we hit a correction.....
 
2- The accounts who never make a trade and wake up a year form now and want out, since they paid a fee and hardly traded........
 
Also, anytime there is market volatility and statement values go down month after month, clients get upset over the quarterly fees.......since they are losing money...
 
Just some random thoughts on the stuff.....
 
Good Luck.....
 

SFEZ's picture
Offline
Joined: 2008-10-25

NEVER_proprietary wrote:
 Thanks for the reply. I'm ok with with traders calling in because they rarely do. I guess it's because whenever my clients call I ask for more money.
I'll be honest if a client make no trades for the year I'd call the client and fire them because I'm really not interested in feeling like I'm taking money from someone.
 
How do you handle a situation where the account value keeps decreasing and they bring up the fee?....I would think it would be worse on a commission based account because the overall charges would be higher a year. I charge atleast 2% per transaction.
 
    
 
How do I handle it?
I explain the benefits and tell them that most accounts come out ahead in the long run by paying a fee instead of transaction charges.......
 
Sometimes they insist on getting out and becoming transactional, usually they say OK, stick with it and move on to another topic.....
 

NEVER_proprietary's picture
Joined: 2009-12-02

So based on the type of account im trying to setup for my clients would I be considered a money manager or an RIA?

NEVER_proprietary's picture
Joined: 2009-12-02

Thank you for your help I appreciate it.

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×