It’s odd the non-MBA finance majors still cry wolf that all tasks tangentially-related to the finance industry are all commission-based compensation even though this is false. Today’s post will go into depth in exposing this myth again.
First of all; a commission is a percentage of a qualifiable sum for a transactional task. Most finance-industry tasks the sum or value is ambiguous. Case in point; an analyst analyses financial projections and get’s paid an annual salary and bonus. Usually $80K salary and $20K bonus. Other clueless claim asset managers get paid a commission subject to what the client may or may not achieve. This is false too. The reality is asset managers get 2 fees. They typically get an annual AUM fee or 2% value of assets under management and a 20% profit bonus contingent on their own ability to create profit from the assets.
Financial advisors are one of the clearest examples of where a commission is a secondary fee or doesn’t apply at all. After all; what is the qualifiable monetary sum value of giving advice? The reality is advisors get typically 3 different fees including a salary. Financial-Planner Magazine verifies this;
The National Investor Relations Insitute (NIRI) in Virginia verifies that the base compensation for IR professionals is also salary and that salaries between 2008-2013 saw an annual increase of 5% per year.
The only time telemarketing for investor relations firms charges only commission is when they are a Boiler Room. Boiler Rooms are considered a fringe of the financial marketing industry and are not representative of the industry as a whole and on average charge 50% of funds raised. Most IRcallanddatacenters.com as they are commonly referred to in 2017; apply about 10 factors to determine what rate they will charge. Here are the list of factors that may include sliding-scale commissions;
Here is a specific example of a telemarketing for investor relations firm in Oakland, California and how workers get paid to man the phones;
Again, the average commission for fringe Boiler Rooms is 50%. Remember years ago the TV news was “shocked” that non-profit organizations like ‘Wounded Warrior Project’ were incurring administrative and marketing costs of 46% of funds raised?
Here is a film fund that years ago was selling penny stock that didn’t meet the SEC classification and was caught doing kickbacks of 30%;
This person hired and paid Boiler Rooms 85% of funds raised;
“Advance fees” are a misnomer taken out of context says one CEO who has raised over $1B. Here he indicates how many fees bankers expect;
State & federal labor laws prohibit working people for free. Those like film producers who are accustomed to preying on gullible & desperate kids to work for free; claim they are doing those with no prior job experience a favor. Here is what my compensation was for my first job at age 17 despite no prior experience;
A commission does apply for an actual brokering task. Like hard money or ABL requests where the borrower has proof of monetizable asset. Here is the definition of brokering tasks and why our broker-only task commission is sliding scale to transactional value up to 10%;
10% is a lot less than 50%.