Launching independent WM firm from Big 5 Canadian bank

Hello fellow monkeys,

Does anyone have any anecdotes they would be willing to share about WM portfolio managers with sufficiently large books, such as 750M+, that have gone out from a big bank to starting their own firm? 

I am asking this because a close relative of mine is in wealth management with a book that is close to a billion. Those who are aware, there is only about a 50% payout to WM on their total revenue, e.g. 8 million in revenue would be 4 for the PM before any additional expenses for the cost of doing business let alone the 50% employment tax that the Canadian government takes which would give them a take home pay of around 1.75 million. 

In my opinion, I think at that scale, starting an independent firm would be feasible, and would make them much more wealthy. Although it would be quite challenging, the compensation would make up for it at that level. 8 million of revenue with a 50% payout to a numbered company as a contractor would allow the 27% rates so the after tax take home would amount to 3 million instead of 1.75. Plus whatever may be left over at the firm level.

Wealth Management is all about capital preservation first and foremost. The investment strategy at the big banks have always been risk averse, you look at any portfolios between banks and you will see a lot of the same companies coming up. The big banks, insurance companies, then just tacking on equities in different industry sectors. The benefit to this is that on a 800M book, a 5% rate of return on the investments increases the portfolio value by 40M. That would be an extra 400k in revenue not considering any new clients that are brought on throughout the year. 

For example, at 8 million in revenue at an independent firm with one advisor, 50% would go the advisor (which, if they own their firm they can have special share types for this money or potentially pay out the money to an associated corp in order to get the business tax rates), then 4 million would be left to pay for the operations of the firm. Assuming 8 client service associates, 2 accountants, 2 IT staff, 2 admin, and maybe an HR person at a cost of 110k each including salaries, payroll taxes, bonuses, gifts, would run around 1.6 million. That would leave 2.4 for the overhead including the computers, equipment, rent for office, custodian, servers, software subscription, promotion, marketing, and any other costs associated with the firm. 

The beauty of the setup is, that due to a large part of the costs being fixed, any additional revenue flows to the bottom line, and that's not considering if he would be able to persuade decently sized PMs to join him. I think the upside potential as may be enticing to some PMs. 

Let me know what you guys think, please poke holes, I would like to know if something like this may actually be viable. 

List of potential pros

  • Better compensation for owner, still getting regular 50% comp payout taxed at business rates 27% instead of employment tax rates 50%. 
  • Ability to bring over advisors and work for the firm. He knows a few potential advisors that may be willing to partner with him, with books at around the 200M range. 
  • Potential for growth, larger upside potential than staying at a big 5 bank. 

List of potential cons

  • Client transition - compliance concerns, may lose some clients, big 5 bank has strong brand awareness, certain clients may be cautious about leaving.
  • Operational challenges, personnel that would be involved has no experience in the operations of a firm.
  • Lack of brand awareness
  • Initial investment for infrastructure, i.e setting up server environment, processes, investment portal for clients, software licenses, investment custodian
  • More difficult client acquisition. At the big banks there is a strong stream of referrals as well as the recognition of the bank, helped client acquisition. However, over half of all referrals now come from existing clients. 
  • Regulatory compliance

Suscipit cumque in dolores qui nulla velit placeat. Molestiae minima qui ad officia dicta. Alias eaque et porro quis. Id itaque accusantium esse dolor. Voluptate similique voluptas iusto et expedita odit incidunt non. Facilis ut doloremque voluptatibus sapiente et. Quo ex quia quia incidunt et voluptatem aut.

Voluptate consequuntur quam et recusandae nihil sed. Qui eligendi dolor et mollitia nostrum et autem. Quasi laboriosam optio ex dolores sunt dolores exercitationem. Rerum repudiandae quisquam temporibus iusto labore.

Dolores blanditiis excepturi cupiditate minima vero fugiat non. Saepe cupiditate dolorem aut ipsa placeat aperiam.

I'm an AI bot trained on the most helpful WSO content across 17+ years.

Career Advancement Opportunities

May 2024 Investment Banking

  • Jefferies & Company 02 99.4%
  • Lazard Freres No 98.8%
  • Goldman Sachs 18 98.3%
  • Harris Williams & Co. New 97.7%
  • JPMorgan Chase 04 97.1%

Overall Employee Satisfaction

May 2024 Investment Banking

  • Harris Williams & Co. 18 99.4%
  • JPMorgan Chase 10 98.8%
  • Lazard Freres 05 98.3%
  • Morgan Stanley 07 97.7%
  • William Blair 03 97.1%

Professional Growth Opportunities

May 2024 Investment Banking

  • Lazard Freres 01 99.4%
  • Jefferies & Company 02 98.8%
  • Goldman Sachs 17 98.3%
  • Moelis & Company 07 97.7%
  • JPMorgan Chase 05 97.1%

Total Avg Compensation

May 2024 Investment Banking

  • Director/MD (5) $648
  • Vice President (21) $373
  • Associates (91) $259
  • 3rd+ Year Analyst (14) $181
  • Intern/Summer Associate (33) $170
  • 2nd Year Analyst (68) $168
  • 1st Year Analyst (205) $159
  • Intern/Summer Analyst (146) $101
16 IB Interviews Notes

“... there’s no excuse to not take advantage of the resources out there available to you. Best value for your $ are the...”


From 10 rejections to 1 dream investment banking internship

“... I believe it was the single biggest reason why I ended up with an offer...”