Ask Brad: How to Reduce Office Expenses (Part 1)

This is the latest installment of a regular column to answer questions from advisors who are considering transitioning to an RIA model. To see Brad’s previous articles, click here. To submit your question, please email Brad here.

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One of the largest expenses of running an advisory practice is office space.

This is true whether you have your own independent practice and pay for it directly or whether you are a W2 employee advisor and are paying for it via your payout. The latter approach is particularly painful.

For you, that is, not the firm you’re employed by.

Let’s start with the inconvenient truth for W2 advisors.

As a W2 employee advisor, you “pay” your firm for the resources and services they provide for you via the inverse of your payout. If your “payout” is 40%, you are paying 60% to your firm.

While you never receive an itemized bill explaining the breakdown, a portion of the 60% payment covers the cost of providing you an office, access to a conference room, etc.