I got a good piece of advice today: don’t give up on your dreams, but don’t quit your day job.
Basically, until I can build up a practice that pays the mortgage and feeds the kids, I’m stuck working for somebody else. Maybe not necessarily here, but for somebody else nonetheless.
why do you enjoy this abuse?
Isn’t the economy booming where you are? Can’t you just sign up for say Edward Jones or similar company, knock on doors and build a book that way? Tons of people in town, making good money, maybe for the first time ever, you can help them!
Isn’t it like 2% unemployment there? If not now, when?
Ideal client - somebody who has $2m to $10m in investable assets, is some kind of executive or entrepeneur, has multiple financial “challenges” that they face (advanced estate planning, “financial independence” planning, etc) but will gladly pay me an AUM fee, plus a financial planning fee, plus a tax compliance fee.
Ideally, I will charge AUM fees according to the following schedule: 1% of the first $2m, 0.5% for 2-10m, then 0.3% thereafter. I think that’s in line with what the major wirehouses charge. Plus, I think that a minimum $2500 financial planning fee is very reasonable for the yearly check-in (estate docs, insurance, investments, employee benefits, 401k review, etc.) and for all the “one-off” work that we do during the year (e.g. answering e-mails and phone calls, small research projects, etc.)
If I can get 25 clients like that, I figure I can gross about $450k, and my net will be north of $300k. (and that’s including my annual “CPE” events and “shareholder’s meetings” in NYC, Florida Keys, Hawaii, etc.)
I’m in the process. I have told Partner #1 (the one I like) that I just don’t see myself ever becoming a partner as long as Partner #2 is around. Not personal–I just don’t think that we have enough in common to sustain a long lasting marriage. He doesn’t value my intellect, work ethic, and other skills as much as I think he should value them, and I think he makes stupid business decisions that I don’t want to pay for.
I’m trying to work it out where I become an independent contractor for the CPA firm. That way, I can still continue to do work for them to make ends meet, but I can also be free to pursue my own interests. They get a tax preparer–I get autonomy and independence. (And if Partner #2 asks my opinion on something that he doesn’t have expertise on, I can bill the sh!t out of him when he refers the business to somebody else.)
Tangibly speaking, I’m in the process of developing a website, because I think that’s the best way to reach my intended audience. It would establish my business as a “real” presence, not just a figment of my imagination. Plus it would help clients self-select, and establishes some basis for what I do and don’t do. I think that’s the first step in really “legitimizing” the business.
^ ok. So, under your current “arrangement” - a term I’m going to use very loosely right now with your current employer, if you were to simply go out and find those 25 clients, would you be getting paid on the assets?
So what is the JP Morgan business model look like? What is their fee structure model, and, how does your business model compare to it? If your competing for the same type of clientele, especially in the $2 million to $10 million segment, I sure hope your in line with JPs fee model otherwise your going to get blown out of the water. Those types of clients are going to be very fee sensitive.
I think we talked about this previously and I will say it again. I just don’t think a client in that AUM range is going to pay 1% on a sliding scale plus an additional $2,500 planning fee.
Also, not a knock on you but it could also partly be about branding. JP Morgan is well …JP Morgan. A buddy of mine runs a really high end practice (he transitioned to about 7 years ago from another dealer) and gets a lot of referrals from some very big laws firms in the city ; he said they would never have gotten those referrals if he stayed with the previous dealer. The law firms told him that the previous dealer just wasn’t high end enough for them to refer to. Same advisor. Same process.
[video:https://www.youtube.com/watch?v=U1eeoiqum6c]
This is what you should do Greenie. Don’t forget to nab the fish and the hottest secretary on the way out.
$22.5k/yr is a lot to hand over if you’ve got $2mm in assets.
I hope it works out regardless
How much do you think an investment advisor is worth? 1% of assets? At least for the first $2m?
How much do you think a multidisciplinary financial planner is worth? $150 an hour?
If a typical plan takes 16 hours per year (and that’s REALLY basic), then ($150 x 16) + (.01 x $2m) = about $22,500.
Doesnt sound that high to me.
Greenie, you ever follow Jocko? Seems like you are doing a little bit of externalizing stuff instead of figuring out how to own the situation and fix it. Good luck regardless
1 percent is a pretty standard fee. I’ve seen a lot of people pay over that for smaller accounts. No idea what you all are talking about.
The fee for the first million should be higher and then it scales down. Greenies fee structure is perfectly allright as a percent of aum.
Usually though most people just charge a percent all in. They don’t try to charge per task.
Are you talking about the Navy SEAL dude? No, I had to google him.
Can you elaborate, please?
To me, it seems like it would have worked years pasts, back when all hedge funds were making 2/20 and the height of finance comps. I’d totally go this route if I could raise some money though.
A quick question, what makes this model recurring? Seems like all the hard work is in year 1… can’t they just walk after a year or 2 if they get approached by a Edward Jones style adviser promising lower fees or some know it all family member tells them they can replicate it?
Sure. They can replicate the portfolio and pay lower fees elsewhere. Good luck elsewhere.
When you have a question about whether or not to file a gift tax return because you gave money to your kids, good luck at Edward Jones.
When you have a question about whether you need to use a living trust, an irrevocable trust, or just a will to dispose of your assets, good luck at Edward Jones.
When you have significant assets and you need to know which ones to put in your marital trust and which ones to put in the pourover trust, good luck at Edward Jones.
When you want to know what a QCD is and how to use one (a technique that would have saved the last client about $7k), good luck at Edward Jones.
When you want to put money into a SEP IRA, but you can’t, because you don’t have the right type of income on your tax return, good luck at Edward Jones.
When the tax law changes and you don’t know if your charitable contributions will be deductible, good luck at Edward Jones.
When estate tax exclusions change, which renders your estate plan virtually useless (at best) or incredibly costly and tax inefficient (at worst), good luck at Edward Jones.
When you want to be charitable, but don’t know whether to use a private foundation, a DAF, a QCD, or just write a check, good luck at Edward Jones.
When you want to form a nonprofit organization, but don’t know whether you need to file a 1023 before you file the 990, good luck at Edward Jones.
When you have a will, but don’t have a Durable POA, Medical POA, Financial POA, Advance Directive, HIPAA release form, or any other very basic, yet very necessary documents, good luck at Edward Jones.
When you have a taxable estate, and your “financial advisor” advises you to buy life insurance, because it’s “not taxable”, good luck at Edward Jones.
When your spouse dies and you’re trying to do advanced planning on their deathbed to take advantage of the optional basis adjustment, but don’t know what assets are IRD assets and which ones are QTIP assets, and which ones qualify for basis step-up, good luck at Edward Jones.
When your spouse dies, and you have to decide whether to file a 645 election on their decedent 1041, or whether to use a Fiscal Year, good luck at Edward Jones.
When your spouse dies, and you don’t know that you have to take RMD on their IRA, good luck at Edward Jones. Or if you have to roll over the IRA and don’t know whether to use a rollover IRA, an inherited IRA, an immediate withdrawal, a 5-year withdrawal, or a 72t election, good luck at Edward Jones.
When you decide that you want to remarry, but you are blissfully unaware that by doing so, you have disinherited your children and provided them with exactly ZERO of the assets that you want them to have (because you failed to update your estate plan), and instead left 100% or your mooney to your new spouse by way of the Texas Estate & Trust code, good luck at Edward Jones.
When you have significant non-advised assets, such as closely-held businesses, real estate, mineral interests, deferred comp, or pension plans, good luck at Edward Jones.
Should I go on?
“In the absence of value, costs matter.”
Why can’t I ask my accountant those questions and be billed by the hour instead of letting him take a cut of my assets? Let an investment guy handle investments, a lawyer handle law, and accountant handle accounting. Or am I saving significantly if I go with a one stop shop, after considering key man risk of course
First, I’m not sure that you’ll be able to save money. Because you’ll still be paying an investment guy, a lawyer, and an accountant. Instead of paying one fee to me, you’ll be paying three fees to three different people. Difficult to know whether or not those three fees will be lower than my one.
By going with a one-stop shop, you are saving significantly. You’re not saving money (well, you might be. Again, hard to say.) But you’re saving time, which is (for my clients, at least) your most precious economic resource. Because you can be relatively sure that I can take care of all these matters, so that you can focus on what you would rather be doing–whether that’s work, family, fun, or whatever you like to spend your time on.
In poker, they have a saying. “If you don’t know who the sucker is, then you’re the sucker.” A similar concept applies in personal finance. “If you don’t know who the quarterback is, then you’re the quarterback.” And if you think you have the intellectual, mental, and emotional wherewithal to quarterback your team (lawyer, banker, investment advisor, insurance salesman, accountant), not only for this year, but across ALL years, including those years after you are dead, then good luck. (You’re gonna need it. *eye roll*)
Maybe the problem is that you have too much of a CPA background. So people think you are an accountant, not an asset advisor.
^Definitely agree. But still don’t know how to overcome it.
That’s part of what I’m hoping the website will do–establish the investment & financial planning business as a separate discipline apart from the tax compliance.