While admitting that DSC compounds contain an element of danger, he contends that, when used properly, they are a good tool for young consultants working their way up. As a young advisor himself 20 years ago, he said he was offering clients the option to include DSC funds in their financial plans to ensure they are aware of the potential risks and costs associated with them.
“If it worked, you could use some mutual fund company money to pay for your plan, that was smart for me,” said Harrell. “I used to have commissions and the option of upfront compensation from DSCs, and that allowed me to eat for a month.”
These days, DSC funds are no longer an issue at Harrell. After revising the business model, the company’s team is now working as an intermediary for an asset management company that they joined two years ago. The practice has welcomed a slew of greenhorns, which gives Harrell a clear idea of what it takes to support young counselors who are just starting out today.
As an example, he talked about a new hire whose typical client has a $ 50,000 account – the natural market for an aspiring consultant who has just left university. With a 1% trailing commission, they would get $ 500 per year, or about $ 40 per month. That means that for anyone looking to build their own independent practice from scratch without DSCs, the math won’t work.
“I’m not going to say we won’t see young people starting their own practice. But they would need serious funds behind them, ”Harrell said. “But even with help, they have to put that into leasing equipment, leasing office space, hiring staff … in all likelihood, it will just take too long for revenue to start rolling. So what are you doing? Burn your life savings? Can you really afford this risk? “