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November 28, 2012 at 11:43 PM
Seven years ago, I considered buying a practice. I offered a gentleman what I thought was a good deal: the payments would be made by the broker-dealer; all he had to do was keep his license going for four or five years (assuming the BD required that he be licensed). He would have received payments as follows, based on his book of business and assuming a 90 percent concession payout to me:
Year 1: 70 percent to him; 20 percent to me
Year 2: 70 percent to him; 20 percent to me
Year 3: 50 percent to him; 40 percent to me
Year 4: 40 percent to him; 50 percent to me
Year 5: 20 percent to him; 70 percent to me
That was 250 percent over five years and would have given him income on increases, too, assuming the assets grew and/or his customers added money to accounts. So, it might have, overall, gotten close to maybe 300 percent in total. Had he said he needed more, I would have probably upped the ante some as to percentages, but he didn’t say he needed more.
