How do these guys make $$?

Discussion in 'Prop Firms' started by cartm, Mar 13, 2003.

  1. cartm


    My cuz works at ML, has been for a while, has a pretty big book, few mil I think, anyway, I was wondering, how the hell do brokers make $$ these days? Weren't they compensated based on commissions in past yrs (decades)? With commissions so low and online so big, how is he doing well? Just wondering bc he knows s##t about the mkt but seems to do well. Do they get a % of assets under mgmt? Anyone know what the fee structure is for these guys?. Reason I just don't ask him is bc don't get me started.

    I remember him calling me last yr saying they were changing their fee structure to 1.5% fee of $$ under mgmt but I didn't pay much attn bc I was planning on pulling my acct bc he didn't do anything. Basically, how do these guys make $$ (and don't say they don't bc I know a bunch who are doing well even in this environment)....tia
  2. Churn em and burn em ...
  3. cartm


    He doesn't churn, (believe me I know, calling in trades yrs ago was like asking him for an arm), I wouldn't think he would be churning a portfolio of mostly fixed income stuff today....I am just wondering if he get's a %....of something....anything lol.
  4. A group I know does Taxes for people to make money.

    I know its a bad time.

    You gotta make a livin.

    Most brokers should try and become traders.
  5. Most brokers are shifting over to a fee based on assets. Merril's 1.5% sounds about right as that's what my mom pays the same company.

  6. cartm


    That's my whole point, it is a really bad time, not surprised to hear that (the tax thing), jay, do you know if the 1.5 is a one time or yearly fee, bc, if it is one time, I just can't figure out how he's pulling in that kind of coin, especially since (I have seen no evidence of this but would presume it to be true), that ML isn't opening that many new accts. I would think it's annually.
  7. DaveN


    I don't know the answer to this, but I'd speculate that they are running this more like any CTA's hedge fund. On those, you typically pay 2% annually, plus 20% of any new profits.

    I'm curious if they take a cut of the profits in these new structures. That may be good for performance incentive, getting both the broker and client on the same side....
  8. itrader1


    The brokerage business has shifted from commissions to fee or asset based business in the last couple of years.

    Commissions are approaching zero (at least compared to the "old" fees like $5 vs. $200 or more). Brokers now get measured and paid by the amount of assets they have under their wings. Some wire houses even penalize their brokers if they stay in the commission side and their pay will depend on their shift to asset based compensation in the future.

    The big boys have figured out that electronic trading has in essence eliminated commissions - there is no broker filling out tickets anymore, the computer does it faster, better and cheaper) and that it is the MONEY they want to control. They have become banks and leverage the $$$ for their own profits.

    Fees range between 1%-3% depending on how good you are in negotiating and on how much $$$ you have.
  9. Its per year, just like any financial planner who actively manages an account would charge. No commissions as stated above. Brokers can make serious coin with this setup if they have enough under management. It eliminates the conflict of interest as well. Much better system in my opinion.

  10. cartm


    Interesting, seems like they are taking a page out of the Hedge fund managers playbook (1.5-2.0% annual fee).
    #10     Mar 13, 2003