There appears to be a wide chasm between the pay packages that financial advisors surveyed for this year’s Report Card on Banks and Credit Unions are getting from their firms and the advisors’ level of satisfaction with the total compensation their deposit-taking institutions offer.
On one hand, the percentage of advisors earning between $100,000 and $500,000 in the past year, including bonuses, rose to 31.3% from 22.7% last year. However, performance ratings in the “firm’s total compensation” category dipped for many firms as advisors gave less than positive feedback.
“It needs some work,” says an advisor in Ontario with Toronto-based TD Canada Trust. “The compensation level is not representative of the work we complete.”
The overall performance average for the compensation category was 7.5; in contrast, the overall importance average for the category was 8.8. The 1.3-point gap was one of the biggest between the performance and importance ratings in this Report Card, revealing that advisors believe their firms’ compensation is not up to snuff.
A main reason for advisors’ discontent was their perception of how their firms’ payouts compare with the rest of the deposit-taking channel. Says a TD advisor in Ontario: “[Royal Bank of Canada] is No. 1. [Its advisors are] paid more for the same job.”
“Compared with other banks, such as RBC and [Bank of Montreal], our salary and incentive programs are not up to par,” says an advisor in Alberta with Toronto-based Bank of Nova Scotia. In fact, several Scotiabank advisors felt base salaries could be higher and that sales targets could be easier to reach.
The ratings tell the same story. Toronto-based RBC was rated highest in compensation, with a rating of 8.5. About 58% of RBC advisors surveyed earned between $100,000 and $500,000 in 2010 vs 20% at TD and 10% at Scotiabank; 46% of advisors with Toronto-based Canadian Imperial Bank of Commerce and 40% of advisors with Toronto-based BMO earned compensation in the $100,000-$500,000 range.
RBC advisors are well aware of how their compensation stacks up against that of their counterparts at the other major banks. Says an RBC advisor in Ontario: “I have contacts with other firms, and I think our compensation is very competitive — more than fair.”
Financial planners with RBC can earn annual incentive payments based on meeting their targets. Those incentives, however, received mixed feedback. Says an RBC advisor in Ontario: “They’ve changed quotas and set the bar higher. Incentives are there, but they are hard to attain.”
In fact, Michael Walker, vice president and head of branch investments with RBC, says the average payout for financial planners has been 60% salary and 40% bonus — but that model is under review for 2012. “Because it’s so important to us,” says Walker, “we want to make sure it’s set up for success in the next five to 10 years.”
What’s important to advisors is consistency. There’s a torrent of dissatisfied comments when firms raise targets or cut their payout grids. And that may explain why BMO’s compensation rating dipped to 7.2 from 7.7 in 2010.
“They’re trying to change the compensation that is tied to selling products,” says a BMO advisor in Ontario. “I used to get paid for whatever I sold, but it’s getting implemented otherwise. It hasn’t changed yet, and I’m not going to be happy when it does.”
Upcoming changes at BMO could not be confirmed, as the bank’s executives declined to participate in this year’s Report Card.
Nevertheless, even when there aren’t any changes to compensation, advisors aren’t necessarily satisfied. TD advisors, whose pay structure remained the same over the past year, rated their firm’s compensation at 7.6, down from 8.2 in 2010.
Several TD advisors noted their payouts weren’t proportional to the work they put in. “For the responsibilities and the jobs advisors do,” says a TD advisor in Ontario, “which is very complex — and we’re not just doing investments — I should be compensated more than what I am.”
Although some TD advisors complained that their base salary may be too low, the bank’s awards and recognition programs generated much praise. Says another TD advisor in Ontario: “It’s comparable, if not better, than the market. There are great recognition tools.”
Among those is TD’s Champions Club, which rewards top-performing branch managers and advisors with three-day trips. “We ask our advisors to figure out what’s best for the clients,” explains Thomas Dyck, president of TD Mutual Funds. “The Champions Club rewards those who do the best job of doing that.”
Montreal-based National Bank of Canada was the only firm in the survey to see its compensation rating increase by half a point or more, to 8.1 from 7.5.
The incentives program for National Bank financial planners has been given a new focus in the past year, says Marguerite Pernice, the bank’s senior manager of wealth management. In fact, two areas for bonuses were changed, she says: “More emphasis [on achieving bonuses is] now put on net investment sales and managed products and less on credit products.”
Many National Bank advisors were happy with the new incentives program. Says a National Bank advisor in Ontario: “The possibilities for bonuses were true to what they said.” IE