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jdc1987 View Drop Down
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    Posted: Apr/17/2017 at 12:08pm
Hi everyone, I'm new to this business, just over a year in. I want some perspectives on other firms. My firm tells me that the industry standard is 1.5, and I have to ask permission to charge less. Isn't 1 percent enough to make a profit for the company, get the advisor an adequate paycheck, and remain fair to the client? What do other firms charge? I understand that we add value by keeping the client invested in the right things, and by recommending the right insurance products with the appropriate coverage. But isn't there a way for us to make a living without charging so much? I'm looking forward to hearing from you? Thanks.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Spaceman Spiff Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 12:16pm
You'll see lots of differing opinions on this, but I think most of us would agree that 1.5% is pretty high.
I'm not sure what other firms are charging, but at Jones our fees max out at 1.35%.  And I think that's on the high side. 
 
What else are you offering besides investing their money and slinging annuities at them? 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote PEACH_cm Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 12:21pm
It's all relative to performance and offering. If you have a shitty track record or wrap a bunch of funds it it too high. On the other hand it could be too low if the opposite.

If you do not want to make money you could always join the peace corp
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jdc1987 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 12:25pm
Hey Spiff, thanks for the input. I do every type of insurance including P&C. I don't sling many annuities, which is why I'm not making as much as some other reps. They have their place, but it's hard to make a living when commissions were just lowered across the board. It's supposed to help us to be compliant under the DOL change, but the client's cost hasn't gone down. Just our pay. The minimum wrap fee was raised to 1.5, but A share commissions were lowered substantially. Doesn't add up to me.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Spaceman Spiff Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 12:54pm
So, you're primarily an insurance guy, but you also have some people who do investments with you.  Is that accurate?  You work for State Farm or Northwestern Mutual or someplace similar. 
 
Is it a firm model type of program?  You don't have any input on the investments, just which model your client uses? 
 
If that's the case, 1.5% isn't unusual, but it is excessive.  The rationale for the fee is that there are actually three layers of expenses in the model - the funds, the firm, and the FA.  Everyone wants to get paid.  And when you add the firm and their costs for running the model, the costs naturally go up.  The firm isn't going to cut what they make, so they adjust your pay to compensate.   
 
I think your firm telling you the industry standard being 1.5% is a load of crap.  If I were to guess, I'd say the industry AVERAGE is 1.25% maybe even a little less.  
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jdc1987 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 1:06pm
I work for Prudential, so yes there is a strong focus on selling insurance, especially life insurance. I don't think many advisors would argue against being properly insured, but the incentive is much higher for selling UL and annuities than it is for selling term life or A shares or even wraps. I actually would have control of the investments, but there are model portfolios, and management programs with fees even higher than 1.5. I do appreciate your insight here as I was doubting that the average was so high. I'm sure the rest of the "industry standards" we're given are also exaggerated. 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote missionshooter Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 1:22pm
You are worth so much more than 1.5% given your training and experience. Charge 2% brah!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote RIArules Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 2:42pm
Coinstar charges 11%.
We may "rob you slowly," but you're not going to see that shit.

Edward Jones Newb, Circa September 2016
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Post Options Post Options   Thanks (0) Thanks(0)   Quote wiredup Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 3:46pm
Prudential is easier to get into than Harvard, which is why they can't charge the fees that Edward Jones charges. Plus when you set up your annual review with Edward Jones, they can help fix your vacuum while they're there as well.
Money can't buy happiness, but it's a damn good down payment!
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Post Options Post Options   Thanks (0) Thanks(0)   Quote D.H.K. Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 4:01pm
Is that 1.5% "all in" including all fund management expenses?  Or is that just your advisor %?

If that's "all in", then that's fine.  Look up some RIA firms and their fees in their ADV.  Some go as high as 2.5%, but I believe that's "all in".

If that's just your advisor %, then that's high - as Spaceman Spiff mentioned.  1.25% or less is usually the norm.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Spaceman Spiff Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 4:09pm
That's going to be just what Pru charges for management.  My guess is you add 75bps or more for fund expenses on top of that. 
 
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jdc1987 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 7:01pm
Yes that's just the advisor fee, not counting fund expenses.
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Post Options Post Options   Thanks (1) Thanks(1)   Quote bc2051 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/17/2017 at 9:17pm
Originally posted by wiredup wiredup wrote:

Prudential is easier to get into than Harvard, which is why they can't charge the fees that Edward Jones charges. Plus when you set up your annual review with Edward Jones, they can help fix your vacuum while they're there as well.


You can do better than this. I've seen it
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Sportsfreak Quote  Post ReplyReply Direct Link To This Post Posted: Apr/18/2017 at 8:08am
Just so you know, I had two clients retire (from the same municipal job) and they had 401ks with Pru. Your firm, that same firm that says you need permission to charge less than 1.5% (which is more like 2..5% including MF expenses) offered these two clients the opportunity to roll their 401k balances in retirement, into an IRA at Pru, which they would manage for 25 bps.
So I'm guessing it's your agency that doesn't want you to charge less than 1.5%

Which just proves that most insurance focused guys don't know jackshit about the real world of investing.

Edited by Sportsfreak - Apr/18/2017 at 8:09am
Sorry MINT, SF is right, I was wrong......Helado...March 8th, 2014
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Post Options Post Options   Thanks (0) Thanks(0)   Quote jdc1987 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/18/2017 at 12:48pm
That may be true about the low fee IRA, but Pru Retirement and Pru Advisors are separate entities. And it is the agency that won't allow. Sorry for not being specific. No offense,  but the Jets are a Mickey Mouse organization just like Pru. And most firms for that matter...
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Omar View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Omar Quote  Post ReplyReply Direct Link To This Post Posted: Apr/18/2017 at 1:28pm
1.5% is not too high if you are using low cost ETFs an/or funds and you can justify it with other planning activities you provide to the client.  If you do an actual financial plan yearly, and advise on things like LTC, debt management, etc than you are ok in my book.  But, 1.5% plus fund expenses to just manage and account in an industry where fees are pressured will likely lead you to losing that account down the road.  Clients must see your value beyond portfolio management.  Otherwise they can head to Vanguard, Fidelity, etc for a fraction of your fee. 
The game is out there. Either play or get played.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote B24 Quote  Post ReplyReply Direct Link To This Post Posted: Apr/18/2017 at 3:00pm
Originally posted by Omar Omar wrote:

1.5% is not too high if you are using low cost ETFs an/or funds and you can justify it with other planning activities you provide to the client.  If you do an actual financial plan yearly, and advise on things like LTC, debt management, etc than you are ok in my book.  But, 1.5% plus fund expenses to just manage and account in an industry where fees are pressured will likely lead you to losing that account down the road.  Clients must see your value beyond portfolio management.  Otherwise they can head to Vanguard, Fidelity, etc for a fraction of your fee. 

What I find funny in this business is that the firms that charge the MOST tend to be the most investment-focused, and provide the least amount of "planning". You typically see 1.5% on investment "platforms" (wrap accounts, SMA's, etc.) like wirehouses, insurance-based brokers, etc. that do nothing more than wrap up your investments and move on.

Many planning-focused firms that have investment professionals, planning professionals, client-service teams, etc. often charge in the 1% range.

Now, a certain degree of that is attributable to account size. If you have $3mm and are at a higher-end, planning-focused firm, then they are happy to have 1% and provide tons of service. If you have $75K at Prudential, then you're getting 1.5% and quarterly account statements.

That's one of the difficulties of this business. I find myself spending more time with smaller clients than with larger ones. Partly because my larger clients have their shit together, and don't really need as much hand-holding all the time.
"If Bellicheat pulls that rabbit out of his a$$ with this kid at quarterback, I'll personally kiss his ring." - Sporsfreak, 09/20/16

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Omar Quote  Post ReplyReply Direct Link To This Post Posted: Apr/20/2017 at 10:47am
Originally posted by B24 B24 wrote:

Originally posted by Omar Omar wrote:

1.5% is not too high if you are using low cost ETFs an/or funds and you can justify it with other planning activities you provide to the client.  If you do an actual financial plan yearly, and advise on things like LTC, debt management, etc than you are ok in my book.  But, 1.5% plus fund expenses to just manage and account in an industry where fees are pressured will likely lead you to losing that account down the road.  Clients must see your value beyond portfolio management.  Otherwise they can head to Vanguard, Fidelity, etc for a fraction of your fee. 

What I find funny in this business is that the firms that charge the MOST tend to be the most investment-focused, and provide the least amount of "planning". You typically see 1.5% on investment "platforms" (wrap accounts, SMA's, etc.) like wirehouses, insurance-based brokers, etc. that do nothing more than wrap up your investments and move on.

Many planning-focused firms that have investment professionals, planning professionals, client-service teams, etc. often charge in the 1% range.

Now, a certain degree of that is attributable to account size. If you have $3mm and are at a higher-end, planning-focused firm, then they are happy to have 1% and provide tons of service. If you have $75K at Prudential, then you're getting 1.5% and quarterly account statements.

That's one of the difficulties of this business. I find myself spending more time with smaller clients than with larger ones. Partly because my larger clients have their shit together, and don't really need as much hand-holding all the time.

Amen to that.  It's funny how smaller clients get squeezed.  If you have a minimum fee per client that you prefer in order to business with them you often have to charge a higher percentage.  My B/D has a managed platform with no program fee (in terms of basis points), just a flat annual dollar fee of $250.  It's a problem with small accounts at say $100K as that works out to be 25bps to me or the client before adding a wrap fee.  So, if I want to get $1000 a year in rev to justify my time I have to charge over 1.25% considering my grid and ticket charges.  If it's a younger client who will build assets I have no problem cutting their fee for the long term future revenue, but if that's all the money they have because they are older I'll usually pass.  Yeah, I know the account is still profitable but I've just set the bar higher at this point in my career.  And my biggest clients are always the easiest to deal with so they certainly pay less than 1%.
The game is out there. Either play or get played.
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