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Mar 15, 2022

Right Size Your Lifestyle

Most veteran financial advisors need a minimum of $5,000,000 by the time they retire at age 67. The math is simple. A 4% drawdown on $5,000,000 is $200,000. Add $45,000 in social security and total income is $245,000. Subtract federal, state, and city taxes and a retired advisor’s net income is somewhere in the mid-one hundred thousand dollars.

Having managed wire-house offices for 20+ years, I know firsthand that advisors’ retirement savings average between $1,000,000 and $3,000,000 by the time they reach their mid-forties to early fifties. They have a mortgage, and maybe a home equity loan to pay off. Many advisors also have two or three college educations in the future that cost $75,000 annually. Even though it might be 10 to 15 years down the road, some advisors have the privilege of paying for a wedding or two. A modern day wedding is surely six figures. An upper middle-class lifestyle is very expensive nowadays!

No wonder advisors say to me, “I’d love to go independent, and truly own my own practice, but I can’t. I need the check.” Please don’t let this happen to you. Make good decisions now.
- Right size your lifestyle.
- Save-save-save
- Go Independent & Live Free!

The "check" doesn't have the overwhelming advantage over independence after you've seen the analysis. The best independent firms pay deals upwards of 200%. Their grids on the 1099 side pay north of 80%. Finally, the enterprise value of an advisor's practice in the independent channel is substantially higher than what wirehouses pay. Bottom line, I don't understand why anyone would sign a 10-year contract and remain a W-2 employee given the uncertainty among the Big-4 wirehouses today. 

Paul Sullivan
Founder and Managing Partner
Wealth Management Independence