The bank advisor | Alex Bird*

Alex Bird, Senior wealth advisor, Bank-owned brokerage, western Ontario

*not his real name

Book size

$140 million; 300 households

Model

The bank takes around 50% of every dollar of revenue.

Compensation

Fee and commission. We did $1.1 million in revenue last year, with $90 million in our fee-based platform. Clients can choose a flat fee based on percentage of AUM or choose graduated fees based on types of assets (equities, F-class mutual funds, fixed income are charged at different basis points). The rest is in traditional mutual funds, stocks, bonds and GICs.

Target Market

Medical and dental professionals, plus other business owners

My cost structure

We don’t just look at the portion of our revenue that goes to the bank. We need to know how much time our team spends with clients. We increase our fee platform to accommodate clients who need more time.

Most of our revenue is regular, so the average client pays 1% gross. Before we commit to a relationship, we clearly explain the services we provide and assess the required depth of tax and financial planning. That way, we can budget time accordingly.

We also budget outside of time. The firm covers an associate’s salary based on incremental revenue, and we have two team members, so we pay for about 70% of one associate’s salary. My partner and I pay for that 70%, plus bonuses and desk fees.

We need our associates to do $1.1 million in revenue; otherwise, it would be down 10% to 15%.

Once our team is paid, there are other costs associated with our practice. Seminars, conferences, continuing education, prospecting activities all come out of our pockets. Those represent about 8% to 10% of our gross revenue, and are done on an after-tax basis.

Then, we’re left with about 35% of the gross revenue.

How I know this

I try to put all my discretionary business expenses on one credit card. This includes gas, phone, travel, lunches and conference fees. Monthly, I reconcile my credit card statement and receipts, and enter them on a spreadsheet. At the end of 12 months, I tally my costs and provide them to my accountant. Since I pay for the accountant, I try to reduce costs by doing a lot of the calculations myself.

I could pay someone to reconcile my credit card statements, but I consider it part of my business. It’s not difficult to sit down with my receipts for two hours on a Saturday morning.

Lessons learned

We did a client survey, and they said a printed newsletter wasn’t useful to them. Now we post articles to our Web site and e-mail the links to clients. The costs are lower. These days, I’d have to incur the cost of a site anyway.

Based on our service model, we can effectively look after clients with a minimum of $250,000, assuming a 1% fee—annual revenues must each be at least $2,500. If a client’s investable assets are lower, we’d make the decision based on other factors, such as future potential and whether or not we can expect referrals down the line.

Take-Away

Know your capacity—and the value each associate brings—so you can hire accordingly.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.