Financial advisors who work at three of the Big Six banks had much to complain about concerning their pay as a result of recent changes to their compensation packages.
Notably, advisors who work at Toronto-based Bank of Nova Scotia, Montreal-based National Bank of Canada and Toronto-based Canadian Imperial Bank of Commerce (CIBC) either gave their firms the lowest or much lower ratings in the "firm's total compensation" category in this year's Report Card on Banks because of changes that led to drastic reductions in their take-home pay.
Scotiabank received the lowest rating in the category (6.9) - a tie with National Bank - because advisors are dissatisfied that Scotiabank eliminated the investment bonus from advisors' pay packages.
"[The bank] took away about $16,000 to $18,000 - or 20% of my salary," says a Scotiabank advisor in British Columbia.
"They did a lot of restructuring this year," adds a colleague in Ontario.
The bank removed the investment bonus to encourage advisors to adopt a more "holistic" approach, says Alice Eastman, senior vice president, customer experience and distribution strategy, with Scotiabank.
"In the past, [the] bonus payout was really focused on the investment side of the balance sheet," she says. "As of this year, [the criteria for bonuses] looks at advisors' sales, the customer experience, as well as compliance-type activities [instead]. This was not at all about saving money. This was about incenting the right behaviour, [so advisors will] really be customercentric and provide the relevant solution."
Similarly, advisors with National Bank took issue with several recent tweaks to the firm's compensation regime. For starters, the bank announced a new compensation structure this past January, through which advisors will take an 8% cut in their salary as of July 1; this did not sit well with many advisors surveyed.
That may explain why National Bank's compensation rating dropped to 6.9 from 8.0 last year, leading to a tie with Scotiabank for the lowest rating in the category.
"The bank made some changes to our [compensation] that aren't very positive," says a National Bank advisor in Quebec. "They reduced our salary, they changed the way our variable pay is calculated and they increased our objectives, which is going to make earning bonuses harder."
Adds a colleague in Ontario: "They've changed everything, making it a little bit harder to achieve targets."
The new payout structure for National Bank advisors is 70% base salary and 30% variable compensation, says Nancy Paquet, vice president, partnerships, with National Bank.
The changes include an 8% reduction to advisors' salary, as well as changes to how the variable portion is calculated; specifically, the latter now is paid quarterly instead of annually.
"We found that National Bank was paying [a greater] base [salary] than most of the other [banks]. In the industry, a lot of [advisors] are paid quarterly. Therefore, we revamped our compensation plan," Paquet says. "We wanted to retain and attract top performers in Canada. We also wanted to make sure we made [targets] more accessible for more [advisors]."
To make up for the 8% salary cut, National Bank introduced an annual bonus to reward advisors for long-term service to their clients, Paquet explains.
Two new elements
In addition, National Bank introduced two other new elements to its variable compensation, she notes: a team bonus (if the advisor's branch hits certain sales targets) and restricted shared units (if the advisor is among the top 25% performers for the year), which advisors will receive with their final quarterly payment for the year.
"In terms of the variable compensation, it looks clear, but it's unattainable," says a National Bank advisor in Ontario.
However, Paquet says, "It's actually going to be easier for more [advisors] to perform. We don't want just our top [performers] to feel that they are performing. We want more of our [advisors with] the right behaviour to have a sense that they succeeded. [Now], they are compensated if they stay with their clients, which is what we want because clients want to grow with their advisors; they don't want to repeat their story [to a new advisor] every five years."
Meanwhile, CIBC received a compensation rating of 8.4, good for second-highest in the category, albeit down substantially from 9.1 last year. That's because CIBC advisors expressed disappointment with changes to their pay introduced this past November.
Specifically, CIBC advisors now must sell a minimum amount of credit and investment products to receive a bonus.
"Prior to this new component, we just had to meet a minimum overall net sales," says a CIBC advisor in Alberta. "Now, there's an investment bucket and a credit bucket."
But while there now are two components to the bonus structure, the bank has not increased the annual thresholds advisors must meet to earn this bonus, says Scott Wambolt, senior vice president, national sales and service, with CIBC.
"It's a very minimal amount of credit products that [advisors] have to sell," he explains. "And we make a number of resources available to help them. There should not be an advisor in the country who struggles with this."
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