No thanks. If I went to ML, I’d start at 32% and I’d have to do things their way. Couldn’t do any of the planning stuff that I like to do.
As an independent, my payout starts at 72% from dollar #1 and goes up from there. And I get to brand my own business and run it the way I want.
And if you look at my B-D platform, I doubt that ML offers anything of value to the client that we don’t offer. There may be some proprietary hedge funds or UIT’s or something, but I wouldn’t sell them to my clients anyway.
It’s been several years since I had any direct dealing with the wires, but it was $50k a year for two years and you have to raise $25mm in that time or you’re out. It may be $50mm in AUM now…I can’t recall.
I know you’re probably just being…you. But that’s not how that works. Your average ML advisor is selling the exact same thing an Ameriprise advisor is. Yes, ML has better access to illiquid products like hedge funds, PE, etc. but that’s a tiny part of their overall advisory business.
Going back to the model discussion, ML reps (along with every other FA out there) are encouraged to sell ML’s model portfolios, but that’s mainly to keep their advisors at ML.
from a client’s point of view, what happens if something happens to you, god forbid? How do you get around the objection of going with a small start up vs a large institution with redundencies in place?
It’s called succession planning and is a huge topic of every financial advisor conference over the last several years. Either you have a plan to sell to someone you like and trust, stay on part-time for a few years to be sure your clients are happy and retention is high; or, you don’t have a plan and your clients will get a call from either a random FA that picked up Greenie’s book or, more likely, some kid working the home office of Greenie’s BD trying to get them to stay. The clients will leave and find a new advisor.
But ML isn’t using a two tiered payout grid right? (i.e. if you sell ML product the grid payout is (higher at xx%, if you sell a different solution the grid payout is lower at yy%).
Well this is part of the point that I’m trying to get across to Greenie. He wants to make the move into WM, but its a slow transition for a whole list of reasons. By going into a firm like ML, they have all the support in house, opportunities to take over from retiring advisors etc. He could get a base salary to help pay for his lifestyle costs, while he builds up some AUM in that first year or so.
I’m with an independent firm as well. Ya my grid is higher, but I pay for all the overhead from the higher grid. At ML, they pay for the overhead. You need to actually sit down and list out what expenses are covered and what you have to pay for each broker dealer.
What type of product does ML produce that would be appropriate for an average investor? I’m not talking about PBIG teams or private banking. I mean for the regular ML FAs sitting in branches trying to get up to $300mm in AUM, what do they sell that’s a proprietary ML product?
It’s not worth it to get hung up on the payout grid. Once you account for the things you mentioned above it’s pretty much a wash. The biggest differences, now, are culture (do you want to own your business or work towards that corner office in a big ML branch?), and what products are offered. ML cut a huge amount of investment options from their platforms. Independent and especially RIAs have way more investment options than wirehouse guys.
Ya I have no idea on the product side (I’m in Canada). I heard of a broker dealer in Canada who offered a higher grid payout if the advisor sold their own product, vs a lower grid payout on third party funds. (This practice has been stopped from what I understand).
^Yeah, I think the DOL scare did away with that here in the US. Advisors have to disclose any conflicts now, which would include getting paid more for a similar product.
If I got hit by a bus or fell out of an airplane–there is only one other Cambridge advisor anywhere close to here, so they would serve my clients while I was out. And if I never came back, they would buy my book of business. It’s in the agreement.
And like Sweep said elsewhere, when you’re with Merrill Lynch, you do things Merrill Lynch’s way. When you’re independent, you do things your own way. I like doing things my own way.
I don’t mind paying for all my own overhead. If I had every software tool known to man and had to pay for my own office, I could still get away with less than $30k in business expenses. (That includes Microsoft 365, Morningstar Office, financial planning software, Thomson Reuters tax software, document management, AICPA dues, CPA license, travel, continuing education, rent, office supplies, license, tech fees, etc.) If you’re on a budget, you can do it with less than $10k.
So if you’re at $50m and charge a flat 1% = Merrill Lynch brings home $225k, and gets everything paid for. I bring home $425k, because I’d be at an 85% payout. Subtract my $30k in business expenses, and I make $395k per year. I’d rather have $395 than $225. I guess I’m funny that way.
I’d imagine it is pretty tough to just raise money on your own with no referral network. I know a lot of the custodians have an MFO referral network for more complex clients they cannot easily service and I’d imagine working at a big place like ML gives opportunities to have friends of clients refer you or to participate in marketing events. Just hanging out a shingle without any anchor capital and placing ads in the classifieds sounds like a much higher risk of failure.
yeah, the assumptions for the pay in greenman’s post assumes you can pull the same AUM and charge the same as an independent or with a big name. Why wouldn’t everyone go independent if that were the case?
That’s the big push these days. Build up a clientele at the wirehouse, then launch your own RIA (or in my case, be a registered rep at an independent BD).
Don’t misunderstand me. There are benefits to working at a big brand-name wirehouse. And if I were in sell-or-starve mode, I’d probably go to the wirehouse too. But I have a day job that lets me do both.
edit - let me correct myself - I have a day job that allows me to grow my practice organically, and develop my practice the way I want it to be developed. I get to choose my own vendors, customers, processes, business model, and investment philopsophy. I don’t have to do things “the Merrill Lynch way”.