Inherit $2M/yr Book at 24 vs Buy-Side Path — Which Should I Take?
Burner account. AN1 in product group at top EB w great deal flow (Have closed 6 deals). Could recruit for PE/HF/growth/credit if I stay on the traditional path.
My dad is a FA with a 25-year-old book generating a little over $2M/year in personal pre-tax income. His firm supports family succession with a ~3-year transition, so stepping in would likely put me at ~$2M+ yearly comp in my mid/late 20s, with additional upside as the firm shifts toward more HNW clients and FO style offices.
I don’t really care about prestige and mostly want to optimize for wealth and autonomy. Is it dumb to pass on the guaranteed economics, or worth doing a few years of PE/HF first? Curious how others would think about this tradeoff, especially anyone who has seen FA book successions.
No brainer. Take the book. Don't let these forums halo effect the buy side for you. You will not make better comp on the buyside until your late 30s likely and that assumes very strong carry performance at a very strong shop. Instead, if you can turn that book generating $2MM / yr into a $4MM / yr book over the next 15 years. You're in elite category for comp.
Thanks for this. Do you see any value in staying on for a year or two as an ASO to build out a high-value network?
There is certainly value in being around future HNW and UHNW individuals and being in the trenches with them earlier in your career. Those people will be your future target clients. So yes, there is value there. But if the question is one or the other, you take the book all day. But if it's more of a question around a couple years in a seat with other very successful investors, then eventually take over the book - I think that's certainly helpful given your exposure to very wealthy future individuals
Beyond that, there is much lower beta with generating $2MM per year with a WM book of business vs being a principal / jr partner at a buyside firm that seems to be crushing it. Things turn change surprisingly quick in PE land, and one good fund that gives you total comp of $2MM per year for a few years does not mean the next fund will do the same.
Also your net stress will likely be 3x lower than your compatriots that grind their way up the PE ladder. That said, if your Dad's offer still stands in a couple years, wouldn't be a bad idea to try the buyside for a year or two to get more experience.
No question about it. Take the book. Wish I had such an opportunity.
take the book and sell it to the dumb pe RIA roll ups man. Now you get 20 racks at 30...
Srry, care to give an example? Havent heard of an RIA roll up
They're paying insane multiples on RIA books rn for rollup purposes, I've heard like 9.0x-12.0x. People are cashing out hard
Are you insane? Taking the book is a no brainer - if you don’t like it, sell it to a fund
Take the book dude. There’s risk to IB and PE routes while this option you have has relatively much lower risk
Can we trade lives? Lol. You can come be a PE VP and I'll take the book for you.
Continue the legacy. Keep building. Become great at wealth management. Wealth management is still a very interesting area, especially when managing a book that size
Take the book. It would make zero sense to not do that
Brother this should not even be a question take the book and make it yours
TAKE THE BOOK and don’t look back
As an advisor who was a banker once….come be an FA. No brainer
Are there any roles I should seek prior to stepping in that would help set me apart as a FA?
Not really. FA is sales. There isn’t anything technical to know or master like banking. It’s all about getting individuals to like you, understanding how you can be of value to them and communicating correctly. Dont see individuals who took some sort of path like everyone else to become an FA.
My (apparently hot) take is that you should spend a few years on the buyside first. Reasons:
Above is all assuming that your father doesn't mind continuing to work for that extra time before he passes his book on to you. Which is up to him, but the high-performing RIAs I've met all seem to love their jobs, and I know more than a few who have kept at it well into their 70s.
This is very helpful. I’m strongly considering working on the buyside for a 1-3 years then stepping in. From your experience, do you think there are any seats that would best optimize the aforementioned points (mainly training, network, and overall experience) with the end goal of becoming a career money manager?
Is this bizzaro world? Enjoying your youth means working 80+ hour weeks? Typically that means getting off work before 10pm and not working weekends so you can hang out with friends while you’re young.
I'm not saying OP should up and join Apollo. Gotta be plenty of places where OP can work "reasonable" hours (like 60) while still working with smart and driven people.
I would make sure it’s something you enjoy and would be good at. This is 150% a sales and client service career. I’m sure you know what this entails based on your dad being in the field for 25 years.
If you’re not good at it, the $2m will turn into $0 in no time. You’ll have to manage/excel with your clients and manage internal politics at your firm to make sure you’re getting what you need to keep delivering for them.
If you’re at a region RIA, $2m payout probably puts you in the top tier of FAs, if you’re at a large institution (UBS, JPM, GS, MS), you’re doing fine but you’re not going to curry favor and have the pull you may want AT TIMES unless you’re also very deft politically.
If those check out, it’s a bit of a no brainer. $2m is where you’re starting out, if you’re good nothing to say you can’t grow that even more. There’s ppl in PWM making $5-10-15m a year with very little stress and an incredible quality of life. Very few people in finance doing that.
I am a FA and faced a similar dilemma at 26 - can't speak for the PE/IB/HF option - I was in Corporate at a bank. Now have a $50M book, with $200K p/a - I started from scratch.
It's pure, unadulterated sales & marketing dude circa. 80%. 15% managing the business, 5% giving advice. Unless you have sub advisors, which is a different kettle of fish. I know the book is established, but I'd be going in with that mindset.
Because even at that level, you'll need to find new clients/inc. wallet share, as people will be drawing down their funds, people will die etc, you'll need to replace them with net new money. And you'll probably need to target prospects with $1MM+ liquid, as you won't be able to take on smaller clients due to cost and time to service them.
Also people do like to sh*t on FAs (ie: stick into a passive fund, why do I need to pay 1% for that blah blah blah)... these people are wrong and have never worked with a true professional. But this is to just stress test your lack of requirement for prestige. Your prestige is your flexibility, and making a difference in clients lives.
I echo the sentiments above to move into it [building a network in PE first like the guy above said is a weak reason (you'll build a faster network being a FA because you'll be forced to - I had a similar concern), but just be weary of you're stepping into.
I'm sounding negative just because I grinded through sh*t, but this is a great opportunity and I'd (probably) do it again given the choice (haven't made it yet). Also kind of surprised why your old man doesn't sell his book for like $15M on the open market and sail off. Anyway, good luck mate.
Just re-read that you'll have 3 years to bed in... that's great, you'll learn all the above anyway.
Congratulations on the success – I know how hard it is to build from scratch (obviously anecdotally).
How do you get in front of prospects? And much of it is leveraging current connections vs cold emailing vs door knocking, etc.?
And you’re correct on the sizing, given the current AUM (and only one FA) I’d need to target pretty wealthy individuals due to costs/time. The way I see it is right now I should be trying to maximize a combination of connections (networking / co-workers) and credibility (ik corporate finance isn’t relevant here, more so being able to convey trust / expertise at a younger age). Not sure how many millionaires would hand over the reins to a 30-year old yk?
There is very little value in trying to build connections in PE or Corporate Finance first and then transition into Wealth Management. Wealth Management is deeply personal. In many ways, it is better to build from cold. Clients should hire you because they believe in you, not out of obligation.
For example, if a friend/ex-colleague of yours moved into Wealth Management and pitched you, you would probably take the meeting out of courtesy. But you would still explore other options. It might not be the right time. You might already have an adviser. There is no automatic conversion. You are far better off learning to generate pipeline from scratch. That is the real skill. If you can create business from thin air, you are dangerous.
Plenty of millionaires hand their money to advisers in their thirties (and younger). Age is not the issue. Sales and trust are. Coming from finance can help in rare cases, but more often it becomes a handicap. You overcomplicate things. My friends who include ex-military/ management consultants etc. built books similar to mine because they just networked, sold, hustled and learned. This is 80 percent sales and marketing. Clients do not care about alpha, beta or standard deviation. They care about “When can I retire?” I had to unlearn the technical language. That said, one ex-BB IBD guy in our office built a huge book & team and earns multiple millions. The common denominator is not technical brilliance. It is sales ability.
You also need to understand what you are signing up for. I built my book through cold calls, cold emails, paid ads, networking, events and bought introductions. I threw everything at it. I was earning 30K while banker friends were on 300K. It was painful. But the compounding is starting to show. This is not a boardroom role. You are running a small business. Some days you are coaching someone through a divorce. Some days you are getting told to f*ck off at on a cold call. You need to learn to clean the shop floor before you scale.
The upside is real. I know of advisers renting yachts for F1 weekends and clearing their costs through referrals. I know others working four days a week earning serious money. The lifestyle is there, but it sits on top of years of grind.
If this is your end goal, I would take the book tomorrow. Every extra year on the buy-side adds negative value relative to starting now. You are delaying the compounding of your book and your skillset for credibility that likely will not convert. Opportunities like this are rare. I would not assume it will still be there in two years.
If you are going to do it, commit. Start from zero. Learn to sell. Learn to build. The sooner you begin, the sooner the compounding works in your favour.
I’d do it and never look back. The best type of gig. It’ll be laughable how easy the day to day is vs banking, this is coming from someone who went from wealth management to banking (thinking of going back now ). There really isn’t going to be a heavy sales aspect of the role given the book is established, more so getting to know the existing clients and meeting with them. Best part is, you can do whatever you want and how you want once you take it over 100%. It’ll be your business but a degree of continuity is important. For example, you could start bringing on more finance career clients from your background.
Remember these books are selling ~4x TTM revenue right now, cash payout over 3-5 years. You could literally take a payout in 10 years and assuming growth in the book, it’s quite the payday. You could in fact do that every 10-15 years and get paid (not always advisable, can lose clients in the transition)
TAKE THE BOOK
Well - if the book will always be waiting for you, and you don’t take it over immediately…isn’t your dad basically working to grow the pie for you while you collect a second income?
Take the book, but double dip and build some buy side skills while you’re at it…
I think the rationale of joining immediately out of banking is that with an extra set of hands the book would grow at a faster rate (and thus the Expected Value of our combined income). Trying to gauge how valuable each incremental year of buy-side would be as it would be delaying a higher expected income.
Ok so sure the obvious answer is take the book and run with it.
Real question is when. You are 5 months in to your stint. Start prepping for recruiting now like it’s your #1 focus - you’re not gonna get fired, and finding the next thing is extremely important. Try to find something you can jump to after the 1 year mark, like growth equity.
Start optimizing that everyone you know will be a potential client in the future. Grab coffees, invite them out on at least 1 weekend outside the office for something (house party / warming / bday etc)
Now onto the next role. Growth equity where sourcing is normal could be a good 1 year stint for good experience. Traditional PE is likely not it.
Stay in that growth role for a year-2 and talk to hundreds of founders / CEOs. Try to make the connections genuine vs others (who will just ask for their revenue / growth rate then cut the call 5 minutes in).
By that time (it could be 1.5 years from now) you’ll be in a position where you’ve had 2 solid career finance experiences with a variety of exposure to people and skills that you never know will be useful.
Ramp and take over from your dad
I have a close friend who works in GE and hates it. For him, it’s a mix of too much autonomy and an incompetent senior team.
From what he’s said, I have a hard time believing that it’d be possible to make genuine connections as a sourcing monkey.
From an expected value perspective, it obviously makes most sense to join immediately out of banking, so for some context im trying to gauge how much potential upside could be achieved from a buy-side role where expanding a network could be highly beneficial (from a sales perspective and by targeting a wealthier potential client base)
Especially considering the increasing prevalence of the intersection between retail investors and private / alternative markets
I'll take your book
TAKE THE BOOK BROTHER
Take the book then sell it after 2 years to an RIA platform
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