It's Not What You Get, It's What You Keep

Transition assistance. Bidding wars. Net payout. Comparing basis. There’s a lot of variables when you’re talking about advisor compensation. You’ll see “Advisor team gets $2M to move to (deep pocket firm).” But what does that advisor actually get to keep?

Even if we just focus on the term payout. You might have a 95% payout, but what are the real expenses involved? Typically, we focus on the override that your RIA or broker-dealer takes, along with the costs of technology and related components.

This is all before considering local overhead, like office leases, building ownership, or staffing expenses. Some of the larger, often overlooked costs include administrative or platform fees—sometimes referred to as global admin fees. 

The real question is: What does it cost to run my advisory business?

You may have a high payout, but these admin or platform fees can be a significant number. Advisors really need to dig deeper into this, as it can be tricky to assess.

Custodians often don't impose trading costs, but broker-dealers—and hybrid RIAs or OSJs—might. You have to ask: What’s the cost of trading stocks, ETFs, or mutual funds? Who absorbs the cost—your clients, the owners, or you as the advisor? Asset-based pricing could also come into play. Understanding the true cost of trading is essential. 

For example, if you manage $100 million in assets and are fairly active, trading might cost you $50,000 annually. If you’re paying 8, 9 or 10 basis points, you could be overpaying.

At risk of rambling longer than is helpful here, I’ll close by emphasizing that net payout is one of the most important variables you need absolute clarity on when comparing platforms. 

Up front money is great, but money over time has a way of compounding.