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26 Cards in this Set

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What is an FA?
It means financial advisor.
What is a "Broker?"
It's a term that used to be used for "Financial Advisor." It must not be used at all.
What is the abbreviation for "Broker/Dealer?"
Why is it vital to find out who someone's broker/dealer is?
When time comes to give references, people mostly want to talk to people in the own BD?
What is "Production?"
It is the total revenue brought in by an FA
What term is used in a "wirehouse" for Production?
"Gross," short for "Gross production." In a wirehouse, the FA typically receives about 40% of the "gross."
How do "Independents" refer to "Production?"
GDC for "Gross Dealer Concession." This is the % of total revenue the firm keeps.
What percentage of the revenue do the Independents get keep?
Anywhere from 70% to 90%. In the Independent world, certain independents can recruit others. The "payout" to the recruit might be 75%. The recruiting FA might receive 90%. So his or her override would be 15%.
What does an FA need to be making to reasonably afford to buy the system?
We've always figured about $80K. That's take-home. In a wirehouse, it's tricky. An FA who has been in business more than five years is generally in the "penalty box." His or her payout may be cut to 20-25% But a relatively new producer could be at 40%. That's why you have to know both year they started and gross. So in a wirehouse, you are looking for a producer doing about $250K. After payout of 40%, s/he will bring home roughly $80K. In an independent firm, it depends on their expenses. The firm takes 10%. IF they have an office and staff, they should net about 60%. So to bring home $80, they need anywhere from $130,000 - $150,000. But with the new Gorilla Solo model, someone who wants to bootstrap just needs to be able to afford $2888 and $199/mo.
Why does it help to know two or preferably three years of production history?
You can tell if the business is growing, shrinking or stagnating.
Why is it vital to know the year someone started in production?
Generally someone who has survived more than 5 years can afford our system. But we also need to know this, especially in a wirehouse environment, to determine if a person is likely to be in the penalty box.
Name three FA's who relatively new in the business and went on to spectacular success
Scott Anderson came on the system $117,000. He now has a book of $140 million. Keith Vanderveen had to borrow $25,000 from his father-in-law. He went on to be a $4 million producer at Merrill. Today he is the President of the Central Division of Wells Fargo Private Client. Key Meyers, now with Baird had to max out 3 credit cards. He now has 4000 accounts in Grass Valley CA, a population area of barely 50,000.
What are the three primary ways FAs earn revenue.
Commission. Fees and Trails.
How do commissions work?
Commissions a percentage of assets and are paid up front. Mutual funds and annuities typically a 4% to 5% commissions.
How do fees work?
Fees are a percentage of assets involved in a particular investment. A mutual fund might pay 1% fee or 4% up front commission. Fees are typically paid quarterly.
What is a surrender charge?
A charge assessed by an insurance company if a client withdraws money from a life insurance policy or annuity before a certain date. This compensates the company for upfront costs it incurred.
Why would switching from a commission based compensation to fee-based cause a "guaranteed income reduction plan?"
Let's say an FA has $100,000 of a client's money to invest. At 4% commission, s/he would receive $4000 less whatever the BD takes. An Independent would pay 10%. So the FA would receive $3600. If that same FA invested the money into a fee-based account at 1%, the amount paid would be $1000 minus the "haircut" taken by the firm. And that's paid quarterly. So this quarter, the FA could receive $3600 or $240. That's why we call it a "guaranteed income reduction plan?"
What is "payout?"
This is the percentage of revenue a financial adviser receives. In a "wirehouse," it can be anywhere from 30% for low producers up to 50% for top producers. For Independents, it's anywhere from 75% to 90%.
Why is "No Production Record—Fast Out of the Gate" a good prospect for the system.
Because they have momentum and often more money than they've ever had in their lives. They are success driven. So don't turn away someone who starts fast, even if they don't have much of a production history.
Why is "Production Down—Low Range" often a good prospect.
Some of them feel their pain and will do almost anything to survive in the business.
What is a "plateau?"
It is a period of flat production. Advisors are very well aware of it and hate it. We offer a way to help people smash through the plateau.
Why do advisors get stuck on a plateau?
Mostly, they get trapped by doing other people's jobs. Service will expand to fill the time available. It will squeeze out, or try to squeeze out, sales. Our solution is to get the advisor to buy some more time by hiring additional support staff.
When an advisor's production is down, why do you always want to check and see if they have recently or are currently converting to fees?
Unless they are following the BGM strategy to convert to fees, they almost always will be taking an income reduction. They have an urgent situation. They are committed to making the change but it's costing them a lot of money. You are always looking for some reason a person has to make changes. This is a big one.
What are different "production ranges?"
$100,000 or less is low. $100,000-$200,000 is below average. $200,000-$300,000 is surviving, especially if the person is an independent. If the person comes from a wirehouse, they are just barely in the range they can afford the system. $300,000-$500,000 is pushing into survival range. $500,000-$1,000,000 is top 10%. $1,000,000 plus is "top producer."
What is Stephen Covey's definition of "insanity."
In his book First Things First, he gives a most interesting definition of insanity. He said, “Insanity is doing the same things and expecting different results.”
Why is Stephen Covey's quote about insanity useful to the Lead Developer or Sales Person?
It's a nice way to say, "You are crazy if you don't buy the system."