Our payout grid is a matrix of Advisor AUM and client account value. So a small advisor with a client under $100K keeps roughly 50-60% of revenue. As you get larger in either category you keep a larger percentage of revenue, up to say 85% or so I imagine.
^Interesting. The BDs I work with pay out based on total revenue/GDC, not AUM. Makes sense if you’re selling VA and other insurance crap that would be hard to put in AUM terms.
For example, Ameriprise pays out 93% to their top advisors. I forget what the minimum GDC is, I think over $1,000,000. Doesn’t matter how the advisor gets there or what their AUM is. Same is true for LPL, Raymond James, Ed Jones, and the wires.
To be sure, having a big AUM numbers gets you noticed by the home office though. They’ll bend over backwards to be sure you don’t leave to be an RIA, so there are other perks.
I"d say that roughly 2% of our revenue comes from client requested insurance products and VAs, we don’t actively sell either.
Mostly recurring revenue through investment management and financial planning.
(edit - this was directed at Huskie)
^The main reason I started with Vest is because they had low fees, and were running a special. Series 7, 63 (including study materials), and IAR registration for just $200.
But I might check with the local Cambridge guy and see if their platform is any better. I agree that 1.5% is pretty rich.
Vest has a B/D platform (that I really haven’t explored yet). I probably need to look into it before I put my “managed money” blinders on.
Under the IAR model, the payout grid is based on the advisor’s rolling gross and the size of the client account.
So at the 50-60% payout range, Vest’s portion of the AUM fee starts at 1.05% (for accounts less than $25k), and goes as low as .28% (for accounts >$2m).
If I were to get to the 75% payout range, Vest’s fee becomes .65% (< $25k) and goes down to .18 (>$2m).
So again, I’m talking about being on the bottom rung of the ladder, both in GDC and account size. And to be fair, I don’t know how long it wil take to get to the higher payout ranges. It may be faster than I think.
To clarify…It really depends on how you look at payout. I use Fee-Based (FB) where I charge a % of AUM as comp; so I consider AUM as the comp driver. Payout grid is based on total commission bands which could also include revenue from sales commissions like front-end, DSC, stock and bond trade commissions.
For FB, the advisor doesn’t generate any sales commissions or rev from trade commissions.
if the Advisor likes to churn DSC thye could technically have a smaller AUM with higher commissions and better grid payout.
WTF man? Why you holding out on us!?
^Haven’t been at my desk much this week. And, now I’m trying to get a few things done so I can go to the club.
^ you must mean the golf club? We all know damn well you’re not rolling models & bottles CFA VIP at a posh night club as a married dad!
^Indeed.
^Respect.
Greenman maybe this can help
STL…any chance you’ve collected your thoughts and are willing to share with us??
^ A and C Shares aren’t going anywhere anytime soon. C Shares aren’t really even that bad when you think about it. They reside in a brokerage account so there’s no wrap fee, and the advisor/BD collects 1.00%. Sure, that’s a higher fee than many RIAs would charge, but C Shares are generally used for low-balance accounts. Charging 1.00% isn’t really out of scope.
A Shares are facing some hurdles but they’ll be around forever (or a long time, whatever). They’re being fazed out of IRAs right now (LPL was the first - maybe second - firm to get nailed with a fine from the DOL). The DOL believes advisors should use the lowest fee share class available in IRAs (and similar accounts). Next will be the BDs that use load-waived A Shares on their advisory platforms. That’s pretty bogus. They charge a wrap fee and collect the 12b-1. In many cases, the advisor doesn’t get a single cent of the 12b-1 in an advisory account. That’s revenue straight to the BD, hence why they don’t want to change it.
However, there will always be a place for A Shares in brokerage accounts. There’s still a lot to suggest that over the long-term, A Shares are the least expensive route and promotes buy-and-hold behavior…which may or may not be a good thing.
Edit: And, no, still not writing any essays on ETFs yet. Been on the road a lot recently.
Edit 2: For some reason when I clicked on this thread it took me to another post so I thought I was replying to something on the first page. This post doesn’t make a lot of sense in this order. Oh well.
anyone who’s wondering what STL was talking about, check out the activity on SPLV or VFH today.
SPLV was down nearly 40% this am
My issues with ETFs are more systemic. As in, I believe there’s a not-insignificant probability ETFs will cause a major market crash. It’s not really about the failure of one or two ETFs to live up to their billing. It has to do with the way ETFs trade and (attempt) to keep their basket of securities in-line with what they advertise. I’ve had conversations with some extremely bright traders that see this coming, but there’s not much we can do to avoid it. That’s a happy thought…
There were many sector and index ETFs, those were just two I was watching this AM. How does an ETF that tracks the S&P 500 end up down 40% when the market was down 5% at its worst moment? The folks at vanguard, state street, ishares, etc. have some explaining to do. I’m just typing in random etfs and finding it all over the place.
IVV hit $167.80 this morning, thats over 15%
how are the inverse etfs doing
It’ll be interesting to see where expense ratios end up. Theoretically, the large equity funds could eventually get to zero (or negative) if they can scale their operations even further and continue to generate returns through securities lending. I’m not sure that will ever happen, as large vanguard equity funds already have tremendous scale, but who knows.