Financial advisors surveyed for this year's Dealers' Report Card remain somewhat disillusioned with their firms' compensation packages. The reason? They say their firms are taking an ever-greater share of gross revenue. Adding insult to injury, the level of support services advisors actually receive from their firms is declining at the same time.
Says an advisor in Ontario with Toronto-based Assante Wealth Management (Canada) Ltd., echoing the mood of many: "They take a large chunk of my commissions. But if I need something, I usually have to pay for it myself."
And although advisors have seen their take-home pay increase since last year for the most part - with a healthy jump in those earning $250,000 or more, to 28% of all respondents from 26.2% in 2011 - many advisors say their payout grids have not been restored to the levels they were at prior to the recession.
Worse still, some firms have downloaded many of their operating costs onto individual advisors while reducing in-house support services in order to maintain a healthy bottom line.
"There seems to be fees for everything," laments an advisor in Ontario with Markham, Ont.-based Worldsource Financial Management Inc. "Technology fees, statement fees, back-office fees - you name it, and I'm probably paying for it."
Despite the gradual economic recovery, some firms are still sticking to their austerity measures. In fact, those firms that haven't restored their grid and bonus payouts to pre-recessionary levels garnered the most displeasure.
"We pay most of our own fees, and our benefits package is pretty basic," says an Assante advisor in Alberta. "Furthermore, many of our production incentives were taken away when the markets took a dive a few years back - and [they] haven't returned since."
Although Assante advisors say they're slowly starting to see a return of their bonuses, there's still much to be desired. Thus, they gave their firm the lowest rating in the "firm's total compensation" category, at 7.6.
"We get bonuses only when we sell proprietary products," says an Assante advisor in Ontario. "I made more than $1 million in gross commissions and didn't qualify for the rewards program because most of my sales weren't Assante products."
There are always going to be areas of dissatisfaction, says Steve Donald, Assante's president and CEO, but the typical payout for Assante advisors falls within the low to mid-80% range; and, he adds, Assante offers many support services that other higher-paying firms don't: "We're always striving to make our services more accessible to our advisors."
As a result of that strategy, the firm earned significantly higher ratings in many of the wealth-management categories (see story on page C14), as well as the largest increase in the compensation category this year, 0.3 of a point from last year's score of 7.3.
Still, at a time in which clients are demanding more bang for their buck, advisors also are demanding more of their dealers. So, those advisors who rated their firms the highest in compensation believe their dealers offer the best balance among support, independence and payouts.
Case in point: advisors with Mississauga, Ont.-based PFSL Investment Canada Ltd. were ecstatic about the changes made to their compensation this past year. Bonuses now are paid monthly instead of quarterly, and brackets have been lowered so bonuses are accessible to a greater number of advisors. These changes are in addition to several equity-ownership options and a vast array of free support services.
"We have it all here," says a PFSL advisor on the Prairies. "Great payouts, a stake in the company and an amazing incentives program."
For Jeff Dumanski, PFSL's president and chief marketing officer, these changes were all about giving advisors fair value: "One of the things we try to do is to take the administrative and fee burden off [advisors]. We minimize the direct hit to their pocketbooks by paying the fees ourselves."
Advisors with Ottawa-based Independent Planning Group Inc. also continue to rate their firm highly when it comes to compensation. That's because the firm provides options for how advisors are paid. Advisors can choose between a flat-fee model in which they pay roughly $1,500 a month but get to keep 100% of their profits and a traditional grid system in which advisors earn between 50%-90% of their commissions based on their level of production.
"What I like the most is the fact that I'm not pigeonholed into just one model," says an IPG advisor in Ontario. "It's important to be able to choose what support I need and at what cost."
Other firms with flexible compensation models include Lévis, Que.-based Desjardins Financial Security Independent Network, Montreal-based Peak Financial Group, Richmond Hill, Ont.-based Global Maxfin Investments Inc. and Calgary-based Portfolio Strategies Corp.
Advisors who ply their trade with these firms are able to choose among payout models based on their level of gross production and the amount of support services they want from their firm. In most cases, these advisors rated their firms highly because of this flexibility.
Says a Portfolio Strategies advisor in Alberta: "I look after my own clients and book. I've been at other firms at which I paid all this money through gross revenue and I was still dissatisfied with the level of support I was receiving. Through this model, I can choose where to allocate funds to create my own customized support platform."
No matter what payout model an advisor chooses, what's most important is that firms are up front with their advisors, says Robert Frances, Peak's president and CEO: "We tell our advisors what the costs will be, and we tell them what services we will provide. We then ask them if they think it's worthwhile. It's a negotiation process within a grid, and there are different grids at different branches."
That said, Frances admits that the process is not a perfect science - advisors are adept at negotiating the best deals: "I don't think you'll ever have an advisor who will say, 'I feel that I'm being paid too much, so maybe I should give some of it back'."IE
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