Turn on Assets

Turn On Assets is a phrase used by firms as one way to measure the productivity of their advisors. It is sometimes referred to as The Turn for short.

Let me present a few simple examples:

1. A mutual fund sales rep manages $8 million dollars. Half of it earns him a trailer of 0.50% (DSC funds held more than a year), and the other half earns him 1.00% (sold on a front loaded basis). He further places $2 million of new business into DSC funds (earning 5% up front). He manages $10 million in total, and his Turn On Assets is essentially his commissions earned divided by the assets managed for the year: $160,000 / $10,000,000 = 1.6% Turn.

2. A stockbroker manages $20 million dollars and regularly trades stock positions for all his clients. He generates $200,000 from buy/sell transactions. He further places $2,000,000 in new issues (IPOs, marketed deals, bought deals, etc.) which generates $60,000 in commissions (although clients don’t see a commission for those purchases). The turn for this broker is $260,000 / $20,000,000 = 1.3% Turn.

These are just some examples, but you get the idea. Generally speaking, a broker would be expected to have a higher turn in the first few years as assets are being gathered and the turn would be expected to slowly decrease to about 1%. If the Turn is closer to 2% and the broker is established, this could raise some flags internally as the broker could be accused of “churning” – generating an excessively high number of transactions, and commissions, that may be in the advisor’s interest, but not the client’s best interest.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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  • Michael James

    Thanks for the explanation. It’s great to hear it from someone who has seen it up close and can explain things clearly.

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