For over thirty
years most major (and some smaller) firms have offered some form of
financial incentive in order to entice investment professionals to join
Such "deals" take many forms, and in recent years have
become increasingly complex and inventive. We will not attempt to
analyze the complexity of all such arrangements, for each set of
circumstances must be analyzed on its own merits in light of each
individual personal and financial situation.
Virtually all of these arrangements have two common
elements, a period of commitment (usually contractually) and tax
consequences. Are such deals really beneficial to the individual
broker? Perhaps, but there is a better answer for those so
inclined. Consider becoming an independent broker and setting up
your own professional corporation.
Consider the following example:
You are a $500,000 producer being offered a
$500,000 incentive "bonus" to switch from one firm to another.
This incentive is being structured in the form of a forgivable four
You take the deal and deposit the check into an
investment account of some sort. For each of the next four
years, your taxable income is $325,000 or so (including the $125,000
in forgiven loan balance in each of these four years). To this
sum you must add any non-salary benefits such as firm contributions
to retirement plans, etc.
However, instead of taking the deal, you go
INDEPENDENT and have an after expense taxable income of
$350,000. BUT, because you have a properly structured
professional corporation, you deposit a substantial sum into a
properly structured retirement plan, or utilize the excess funds in
some other tax deductible manner.
WORK THROUGH THE NUMBERS.
In almost any case, you are better taking the independent path, IF
RUNNING YOUR OWN BUSINESS IS FOR YOU. Naturally, taking the
independent path involves no commitment as to time and no
Please call us for structural details