Your Real Net Payout not Gross
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[quote=vbrainy][quote=Moraen] [quote=mlgone] [quote=Indyone] [quote=shantom1]BTW, mlgone- LOVE the avatar…[/quote]
Yeah, the avatar is fine, but the signature line is childish. If Spiff wants to profess his Christianity, I respect that. You don't have to agree with him, but using your signature line to belittle him is just plain childish. You're not the first to do this, and singling you out is unfair, so I'll say more generally that using your signature line to belittle or make fun of another participant (at least legitimate participants - I'll give you a pass on trolls) is getting old. I'm not sure who started this trend, but I'm ready to see it stop.[/quote]
the guy is a self admitted freak and hopefully I am helping him???? I respect your opinion but I make my own choices.......He chose to admit this racist thoughts about gay people and I want to remind him everyday of what he thinks he is and the rest of us who know what he is........
If Spiff wants to profess his Christianity, I respect that." .......So do I but his way was to call 'Gay's Creepy". I took offense to that.
Thanks Godfather.........I get your opinion........BUT I got my own. That sh*t is just backward. Read the tagline.[/quote]
ml - you know I got your back on most things... but I do have to say that comments on gay people aren't really considered racist.
[/quote] Morean, aren't you the self professed monitor of this forum who wants everyone to stick to the topic? Why don't you walk your own talk??? Do as I say and not as I do??? Your post has nothing to do with the topic. . . .or maybe you are not even in production and you don't have a net payout? [/quote]
Maybe I'm not.
And maybe you're lying about yours. I was responding directly to ml.
From the other thread it is pretty obvious I don't mind speaking directly to someone who takes things off topic.
As for my net payout - I deal in revenue and profit, not net payout, since technically I receive 100% of all fees.
Oh, and as for the advisors who work for me - their payout ranges from 60 to 80%.
ICE, I agree with you. I know “all firms do it”, but I can’t stand the nickel and diming. However, it’s tough in the brokerage industry. The reason is because of different compensation/fee structures. There are clients that buy nothing more than CD’s or some stocks or bodns in their account, and hold them for years, essentially costing the firm money after a while. Then there are clients that trade actively or participate in a fee-based program that over-compensates the firm. So, like income taxes and social security, the “active” clients compensate for the “non-active” clients. IMHO, if you are in a fee-based program, you should pay NO fees, no IRA, no debit card, no checking, no ACAT out, no wire transfer, etc. (obviously you have to have limits on transactions, but the “service” itself should be free).
I have actually paid for a few clients’ ACAT fees (incoming), because they got screwed at their prior firm, then pay a fee or commission at my firm. The last thing I want is for them to have to pay a nasty $75 fee (often on multiple accounts). So if they are going to be a good client (fee-based), I will sometimes reimburse the fee (it usually gets ACAT’d over with the rest of the stuff).
Fees are just one more reason people get irritated by our industry.
I’m at least glad Jones has waived IRA fees for Advisory clients (and/or clients w/over 500K). It’s a start.
I pass ticket charges on to clients. They aren’t much. There are no IRA fees or any of that.
[quote=iceco1d]I know you don’t use mutual funds, but SUPPOSE you did, and suppose it paid a 12b-1 fee. What would happen to that fee? Would you get it? Would the client get it rebated?
[/quote]
12b-1 fee goes to the custodian. Then is is up to the advisor to rebate it or not.
Ice you make some good points and they are things that anyone looking into going indie should be aware of. Honestly, i didnt really know enough to ask all the right questions, or more accurately i was made aware of all the nuisance fees, tix charges, 12b-1 fees that i dont get because they dont cover the ticket charge, but didnt think about it hard enough.I realize now how much they add up towards reducing my real payout. I dont think it would have changed my decision though.
My B/D rebates 12b-1 fees back to the client in fee based accounts. Most of my busienss is in fee based platform with no tix charges on the first 50 trades, so that helps me. I looked at year end numbers and my net net payout after everything including rent is 63% of gross The gross # i am using includes phantom gross that i am credited with, which is the program fees on the fee based accounts that the B/D haircuts. So i think its a pretty true number. The only thing not included is the 12b-1 fees that the broker dealer keeps because the ticket charge is not covered. Also its the first six months so it includes about $2500 in startup costs (computer, stationary, etc. No matter how you look at it i am better off than at the wire, where i would have been at 37%Bob, I’m estimating my solo office payout to be similar to yours (about 63% of gross).
Totally netted to the bottom of schedule C. I haven't exactly been building an empire (working that hard to capture new AUM). With the fixed costs, the next dollars earned would all be profit (until I hired the next helper), so the payout % would go up pretty easily by bringing in a little more AUM. Virtually no one bothering me. The challenge is to challenge myself to grow the gross, and effective payout % over the fixed costs in 2010, and beyond. 10% growth a year would have a huge effect on the value of the business at my retirement. But I'm not interesting in managing an empire or working that hard. What a challenging opportunity, "recognition" and motivation, though, have to come from within.Milyunair - same for me. I know right now my fixed costs run a little less than 10% of my gross. Add 20% to my gross and that number becomes more like 8%. And so on. Of course, double the business and the number is 5% but when the business doubles you need to add overhead in the form of admin help.
The biggest challenge being indie, especially as a one man shop, is, as you said, getting and staying motivated and disciplined. Discipline has been a big challenge for me. But the last two weeks i have been ramping it up, on the phone every day, hopefully i can keep that going- no - i WILL keep that going, and that will get me the 5% number, which will get my net closer and closer to70%. Home Run.Ice - i agree, i dont understand the point of charging a ticket charge on trails. Its not like they are processing a trade.
And if could just provide clarity, it would take them that much further away from the wirehousesThere are new firms out there saying the flat fee every month is $xxx.00 and then you get 100%...Sorry, going to vent this…
A company like LPL will give you a “93% payout.” Awesome. Wait, what about program fees? What about ticket charges? Why not just say your payout is 85%, no b.s. 12b-1s get paid out or rebated to the client. No program fee. No ticket charges. Can’t happen I guess.
How about custodial fees? The fund companies can do it for $10 a year? So can the annuity companies. And they can typically waive them @ $50K. So the brokerages can’t do it for the same? Nah. Gotta be $25, or $35. Or maybe even a little bit more. Why? Because they can, and because “everyone else is doing it.”
ACAT fees? Termination fees? Seriously? My firm just implemented this - and although I haven’t lost a client yet, and I probably don’t care what they have to pay when/if one fires me, but wtf? $50 to leave? Some firms are $75 or $100? Ridiculous. Why? Again, because they can, and everyone else does it.
How about those really handy-dandy technology fees? At least the EDJ people get something for theirs. What does LPL give you for $100/month? Because I was at Staples yesterday, and I’ll tell you what…I could buy a metric-ton of software for $1200 a year! And why do they do it? Because everyone else does it and we sit still for it.
What a crock of sh!t.
I think a firm could really clean house if they were just honest with their FAs and their clients. It’s a 75% payout. No b.s. Or, the fee is 1.25% per year. Period.
Yeah but instead they jacked up their other fees... I can't believe they make people pay $75 for a TODICE, I agree with you. I know “all firms do it”, but I can’t stand the nickel and diming. However, it’s tough in the brokerage industry. The reason is because of different compensation/fee structures. There are clients that buy nothing more than CD’s or some stocks or bodns in their account, and hold them for years, essentially costing the firm money after a while. Then there are clients that trade actively or participate in a fee-based program that over-compensates the firm. So, like income taxes and social security, the “active” clients compensate for the “non-active” clients. IMHO, if you are in a fee-based program, you should pay NO fees, no IRA, no debit card, no checking, no ACAT out, no wire transfer, etc. (obviously you have to have limits on transactions, but the “service” itself should be free).
I have actually paid for a few clients’ ACAT fees (incoming), because they got screwed at their prior firm, then pay a fee or commission at my firm. The last thing I want is for them to have to pay a nasty $75 fee (often on multiple accounts). So if they are going to be a good client (fee-based), I will sometimes reimburse the fee (it usually gets ACAT’d over with the rest of the stuff).
Fees are just one more reason people get irritated by our industry.
I’m at least glad Jones has waived IRA fees for Advisory clients (and/or clients w/over 500K). It’s a start.
So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anywayIce, yeah, I've been trying to get everything out of 12b1 and into wrap just to clear things up for my clients and myself.
So, by cutting out 12b1 fees (using mainly ETFs), I raised the wrap fee on smaller accounts. Smaller accounts I tell, " we'll be using indexes without 12b1s, and making the fee visible." On smaller accounts, I'm getting a raise, on larger accounts, without 12b1 mutual funds, I'm taking a pay cut. If you look at the admin fees on wrap accounts, and then multiply by the b/d payout, and all of the other charges, the b/d is doing really well. But it is nice having the b/d brand and compliance, and keeping insurance licenses, and being left alone. Expensive, being free and solo, but very stable and flexible.[quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] But that is questionable too, because there is a lot of things I can write off as a business owner that an EDJ, Wirehouse, W-2 employee can't, so comparing before taxes doesn't work either..Just a note, I’m at 68%, the company pays all expenses that a wirehouse would pay.
[quote=chief123][quote=B24][quote=Sportsfreakbob][quote=Squash1]So when calculating your net(for those who have posted) what are you subtracting out? what aren’t you?
I think someone posted this before, but 2 people with same everything could have different nets depending on what you take out.[/quote] Squash, (net check from b/d minus rent (which in my case includes phone, office cleaning, etc) ) divided by gross = true net. What i guess is not included in my number is self employment tax, cost of CPA, and postage (which is minimual). Items like marketing costs,, i.e., taking clients to lunch, are irrelevant because i paid for that at my wirehouse b/d anyway[/quote] Yeah, everyone's idea of "NET" is different. IMHO, "Net" should mean the profit of your business, plus any draw/salary you pay yourself, before income taxes and EE payroll taxes on your W2 salary. You should look at it like a business, not like a wirehouse employee. So, really, it should be: Gross Commissions Program Fees Ticket Charges Other B/D fees Rent Office Expenses (supplies, util, CAM charges, etc) Payroll ER Payroll Taxes Health Insurance (and maybe DI and Life if you want to consider those) Licensing Expenses Marketing/Advertising Costs System Costs Postage Phone CE Training Other = NET INCOME Before Income Taxes and any EmployEE payroll taxes on your salary.[/quote] But that is questionable too, because there is a lot of things I can write off as a business owner that an EDJ, Wirehouse, W-2 employee can't, so comparing before taxes doesn't work either..[/quote] Agreed. But overall it's the best way to compare apples-to-apples. But at Jones/wirehouses, there are much less out-of-pocket costs, so the tax affect is smaller than you might think (a little bit of postage, some marketing, a few office expenses, etc.). That's one of the reasons the payout is lower - the firm pays for most of the costs: rent, assistant salary, tech, ticket charges (client), licesnsing, training, payroll taxes (ER), paper, toner, etc. You can simply "gross down" your deductible expenses that are "out of pocket" at wires if you really need to compare down to the nickel. Or I suppose you could just compare after-tax, but then you run into all sorts of complications....owning real estate, how you file your taxes (joint, single, etc.), business structure, other deductions (mortgage, kids, etc.), some people are honest on their taxes while some are not (yes, some out there write off nearly everything under their business). Really, we are talking about comparing one indy setup to another, so the tax implications should be about the same.B24, in making the move to independence it is hard NOT to compare to the take as an employee. For example, health insurance: you have a cost as an employee, so I always try to compare the additional cost an indy might have vs. a subsidized plan at a large company.
In other words, as a business owner the whole cost is real but in comparing to the "wirehouse" you can't compare it to zero (since everyone pays something as an employee). To a lesser degree, lunches with clients, etc. I suspect the tax benefits of independence are slightly overrated because they are offset by employer side payroll taxes (which adds 7.65% to start).[quote=Cowboy93]B24, in making the move to independence it is hard NOT to compare to the take as an employee. For example, health insurance: you have a cost as an employee, so I always try to compare the additional cost an indy might have vs. a subsidized plan at a large company.
In other words, as a business owner the whole cost is real but in comparing to the "wirehouse" you can't compare it to zero (since everyone pays something as an employee). To a lesser degree, lunches with clients, etc. I suspect the tax benefits of independence are slightly overrated because they are offset by employer side payroll taxes (which adds 7.65% to start). [/quote]Depends on how much you are paying yourself. Set up as an S-Corp, you don't pay as much as you think you do.