Morgan Stanley announced they’ll be changing their payout grid in 2017 — upping the level of production needed to attain the utterly ridiculous 32% commission share they’ve pulled out of their fucking asses.
As of now, a broker at Morgan Stanley needs to produce $220,000 in gross commissions — in order to retain a slap in the face — or 32% of what they produced. But in 2017, that same piker broker, albeit hard working and poor as shit, will need to produce $242,000.
Here is how the numbers work in the real world.
$220,000 at 32% payout = $70,400
But wait, there’s more!
From that $220k, one could assume a sundry of fees to be levied upon them. For the sake of brevity, let’s assume Morgan dings them around $1,000 per mo. Now you’re making $60,400 per annum.
At 25% Federal tax bracket, 5% state tax, social security, medicare, the low end Morgan Stanley broker will make around $38,000 take home per annum, or $3,200 per mo. That is poverty, literally.
Why in the world would anyone stay at Morgan when you could easily go independent and receive a 90% payout? Bear in mind, at an indie firm brokers will be under a 1099 schedule and will be able to write off many expenses — thereby lowering their tax burdens.
Alas, if you’re part of the elite club at Morgan, doing $5m or more in production per annum, you’ll still receive a payout ranging from 51.5% to 55.5%. Plus, you’ll get invited to annual golf matches and get to rub elbows with all of the wonderful C level execs at the firm.
These wirehouses are plantations for aspiring brokers and advisors. Avoid them like the plague.
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How much in dollar amount of capital traded is that to gain 240k in commissions? Sorry I have no clue how much commissions are at these outfits.
Typically brokers charge an average 1-1.5% for managed accounts (that will never surpass the rolling returns of the sp500)
So, figure around $20mil
I just quit Morgan last month and went Indy. They were even charging me to use their portfolio management platform.
So they are charging you basically a facility charge and then charging the client 1-1.5% management fee on AUM? Then your pay is (AUM(1-1.5%))(.32) – facility charges?
Under an indie platform, after expenses, net net payout should be around 65% — at around $250k production. The more you produce, the greater the margins.
In other words, you will literally double your income by going indie.
About 1% annual fee, so $24m under mngt.
You pay for the Morgan name.
You get nothing for that name.
They don’t make the brokers sign a non-compete, or no-poach, letter?
Ways around it. Rarely are they enforced.
I get 90% at a small shop. it would take an active of God for me to even consider going to a bulge bracket outfit.
Same here – 90% payout. Actually tempted to register an RIA and keep the remainder.
RIA model is best. RIA in a box is pretty good. You can get started with less than $5k, then would need to pay for compliance review.
Appreciate your input. I think there’s a lot of potential in bringing over other advisors from the big guys too, this squeeze is on at all the wire houses.
And all these people do is dial for dollars everyday or do they do research?
In my experience, dialing is dead. I’m sure some can make it work, I didn’t see anyone make it that route. I was there for 4 years. Out of the say 30-40 people hired during that time only I and another actually made it through their program.
I was a stock junky in high school and college so a wonderful boss allowed me to run a portfolio after 2 years of persistentice.
The others just push firm asset allocation models and financial planning. None of them had any real market knowledge, they’d say “buy and hold… diversify.. etc” just to keep clients paying the quarterly fee.
Most people I know dialed for dollars and did so with varying degrees of success. At the core of gathering assets is networking and meeting new people. The easiest way to do that is to pick up the phone.
Most brokers have phone fear, however, and is why they fail.
Yes, spent 8 years at Morgan. All they want you to do is gather assets and put those assets in non discretionary accounts, preferably Morgan’s own asset models. Hardy any of the advisors knew anything in depth about the markets. Left for RBC about 2 years ago, and although a regional, much better culture and I run full discretionary models there. 91% fee based from 1.6% fees and lower based on household size, mostly focusing on dividends and tactical allocations. Many of the independents I know are shitting a brick about the DOL.
FINRA now going ape over REVERSE CHURNING. It’s unbelievable how fucked up that place is.