Random question I don’t know where else to ask:
I’m mid-30s, have a family, am a few years into a role I like making make decent money (~$300k) with moderate hours and good trajectory in a second tier city I love.
The older I get and more elite circles I enter (country club, private schools, etc), the more random money managers I meet. I know dozens of guys from various backgrounds (some elite MBA type backgrounds, other dumbass probably 2.0 GPA from a state school undergrad only) who work in random financial advisor groups who seem like they are crushing it.
How much does some 35-year-old at the “Smith-Jones” group of Merrill or Wells Fargo Advisors actually make? Is it entirely based on fees of AUM? I know building the books of business takes years, etc, but how much does some random guy who is just an employee make?
My curiosity peaked after a back to school event for my kid’s private kindergarten, and I swear half of the dads are these random money managers with various credentials - RIA, CFP, etc. How much are these guys actually making? Is it all smoke and mirrors just to attract clients?
Perhaps I’m just cynical because I invest my own money and assume I am smarter than these guys, but what gives?
You should have the answer to that question if you assume you’re smarter than these guys
Well done, I set myself up for that. By smarter, I understand what they are selling and my situation is not complex enough to need to pay them for advice (yet?)
But seriously, I’ve seen salary ranges online that all seem low and more like back office positions. What do the rainmakers make - and is it purely a formula by AUM? The guys in their 50s and 60s I’ve met doing this appear to do no work and just golf and fish full time.
Based on the most helpful WSO content, here's what you need to know about the earnings of financial advisors, particularly those at firms like Merrill or Wells Fargo Advisors:
Salary Structure: Financial advisors at wirehouses (e.g., Morgan Stanley, Merrill, Wells Fargo, UBS) typically receive a salary during their training period. However, the training programs are highly competitive, with less than 20% of trainees successfully completing them.
Compensation: Once established, financial advisors' compensation is largely fee-based, focusing on assets under management (AUM). The payout ranges from 35% to 45% of the fees generated, depending on their production levels. Additional benefits may include 401K matches and deferred compensation.
Client Requirements: Advisors are generally required to focus on high-net-worth clients, with account minimums often set at $250,000. Smaller accounts may result in reduced payouts, sometimes to zero.
Earnings Potential: For a 35-year-old advisor at a firm like Merrill or Wells Fargo Advisors, earnings can vary widely based on the size and quality of their book of business. Advisors who manage to build a substantial client base and generate significant fees can indeed "crush it" financially. However, those who struggle to meet production targets may find it challenging to earn a high income.
In summary, while some financial advisors can earn substantial incomes, particularly those who successfully build and manage large books of business, the path to such earnings is competitive and demanding.
Sources: https://www.wallstreetoasis.com/forum/wealth-management/qa-a-bored-financial-advisor?customgpt=1, , , Only analyst and Co-workers are 10-20+ years older than me, Do BB bankers really make that much money when you adjust for the cost of living?
Financial advising is a relatively slept on career path on WSO.
(Gonna be some generalizing in my numbers so if you get paid more/less go get a waffle somewhere else)
To answer the comp question there's the junior path where a firm will pay a salary for ~2 years generally 60k - 120k depending on experience, team your joining, location, etc.
After this probationary period of sorts and assuming you've passed your exams, (generally SIE, 7, 63/65 or 66, state insurance exam), and you've built your book of business up to a certain point call it ~20m AUM, 1% (call it all wrap fee), payout matrix is something like 40% to you 60% to firm at lower AUM, you take home aprox. 80k. you grow AUM the market goes up 7% a year, your payout gets better the more AUM you have boom. but this is the hard route.
So that's doing it on your own, not joining a team, not buying another advisor out.
Alternatively, if you join a another advisor or a team your payout will likely shoot up to there's or something comparable (generalizing) call it 47% you / 53% firm. 94k vs 80k and all you've done is increase your % by making friends at the firm. That's not including having any new assets from the team allocated to your rep number since you'll likely be trying to build the trust with the existing clients.
Now here's the fun part about how all these guys/gals are doing well.
They'll join a team, at call it 200m AUM (since I want to use round numbers), buy them out at 2x revenue, except here's the thing, the firm will give you an interest free loan to buy out the business and will handle all of it. Depending on how it's structured the leaving advisor can be paid out over ~2 years (depending on how sticky the assets they left are among other factors), while the one taking over the book can pay it over 3 years so they're still getting to see the fruits of their labor. did I mention the revenue at this point is $2m. we'll call payout at this point 50%/50% (varies by firm see bolded above).
So you're 30 years old, have 100% equity in your business, taking in $1m in salary+bonus+deferred comp, you haven't had to work a weekend except to go to a client's wedding and the last time you worked a night was grabbing drinks with your buddies who went into banking and are too restricted to manage their own accounts so they pay you to.
my post doesn't address RIAs or fee-based advisory or failing out or a multitude of other factors and YMMV.
This was the comment I wanted to see. Thanks for the breakdown.
It seems to me that many successful wealth managers work way less and are typically less stressed than many other high earners.
It also seems that the trajectory is potentially more stable than other paths too. What are the downsides I’m missing other than it’s hard to recruit clients when all you are is a glorified relationship manager?
Thing is creating your book is very hard, if you're good in sales its a good career but not everyone is making crazy money. Its similar to real estate, there will be people at the top 5% 10% that bring in big money but rest of them make enough to live comfortably but not crazy amount, yet both type of realtors will be driving a range rover.
glorified relationship manager isn't a very pleasant way to describe it.
Like any other job to excel you have to be good at it, being good at it means convincing people they should trust you with potentially their life savings. At first you're some kid in your early twenties whose barely out of school and licensed, how much do you really know?
People don't care what you know until they know that you care- but when they do it can turn out amazing. Part of the strategy once you make friends and influence people is referrals, if you become friends with a CPA or a lawyer and refer each other clients, you can save a lot of time recruiting and focusing on revenue generation.
There are challenges with scaling at any job but the hardest part of being an advisor is you actually have to talk to people and people generally have to like you.
Bankers get paid what they do because they're willing to put up with and be treated like: shit. They don't need to develop people skills, they need to be able to build models and presentations and sacrifice their time.
Being an advisor requires you to learn a completely different skillset, talking to people.
Your career path is a lot more dependent on you than anything else in advising, you charge a %, your firm (assuming you're at a wirehouse) has a payout matrix, want to get paid more? grow AUM.
Bankers can make it rain or not, the cycle can go up and down (see the last 2-3 years of people screaming at how shit bonuses are across the board), bankers can justify how much they get paid but they're still at the will of a greater investment bank.
An advisor has their own business, their own assets, their own clients and is worried about the last days of each quarter hoping it closes higher.
most banks have figured out that recurring stable revenue that grows at the rate of the stock market while having no balance sheet risk is a pretty fucking good deal.
The pureplay IBs that don't have it struggle without it.
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