This article appears in the May 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
Compensation and bonus structures alone don’t drive advisor satisfaction at brokerage firms, but fair, clear grids with achievable targets are appreciated.
Investment Executive’s 2022 Brokerage Report Card revealed more advisors are satisfied with their pay. The “total compensation” category was among the 10 highest-rated categories by advisors for performance (8.9, up from 8.7 in 2021). The category also was one of the 15 categories rated 9.0 and above for importance (9.1, up from 9.0 a year ago).
The average performance rating for the “bonus structure” category rose slightly to 8.5 from 8.4 in 2021, while the category’s average importance rating fell to 8.3 from 8.5 in 2021.
The two firms with the highest-rated compensation structures this year were Wellington-Altus Private Wealth Inc. (9.5, down from 9.9 in 2021) and Canaccord Genuity Wealth Management (Canada) (9.3, up from 8.7). Wellington-Altus also had the highest-rated bonus structure (rated 9.4, down from 9.8).
Financial advisors with both firms valued competitive but consistent, simple grids.
“I can focus more on my clients rather than running more clients to make a reasonable living,” said a Wellington-Altus advisor.
Another Wellington-Altus advisor praised another benefit: “Our compensation system here is simple; it’s not a 15-page document. It aligns the advisors with the clients.”
Commenting on the firm’s bonus structure, a Wellington-Altus advisor said, “There are incentives for the top producers in the firm, and they’re in line with the top of the industry.”
Wellington-Altus executives confirmed that the grid hasn’t changed in five years, and that an annual team bonus is available for large producers. “Compensation structures should not be rocket science,” said Shaun Hauser, CEO and co-founder of Wellington-Altus Financial Inc. “If you can’t explain it in a couple sentences or in a couple pictures on one slide, then you’ve failed advisors.”
As for pay at Canaccord, “It’s simple and there is no bias,” said a Canaccord advisor in B.C. , as the grid rewards new assets.
“They don’t have the golden handcuffs,” said a Canaccord advisor in Alberta. “They don’t keep you under their thumb, and their payout level is high in comparison to other firms.”
Canaccord’s president, Stuart Raftus, said the firm aims to reward revenue plus asset growth. “We’ve taken an approach where we just want to keep it very simple and get people focused on client objectives and client outcomes,” he said. That’s better than making advisors do “five or seven or 10 different things to reach [their] level of compensation.”
The firms with the second-highest-rated bonus structures were CIBC Wood Gundy, Edward Jones and National Bank Financial Inc. All were rated 9.0 this year, compared with 8.1, 9.3 and 8.6 in 2021, respectively.
Wood Gundy saw significant improvement (by 0.5 or more) in its bonus rating. It also was one of four firms that saw a significant rise in its rating for compensation. Wood Gundy advisors said their pay was fair and had improved in recent years.
Ed Dodig, executive vice-president and head of CIBC Private Wealth Management Canada and CIBC Wood Gundy, said compensation changes were implemented early in the bank’s 2021 fiscal year.
“We simplified the grid,” Dodig said, to avoid “having advisors trying to calculate how they get paid as opposed to just focusing on their clients. We wanted to make sure it was competitive.”
Firms with more complex or evolving compensation grids and bonus structures were rated lower.
TD Wealth Private Investment Advice and Odlum Brown Ltd. received the lowest ratings in both pay-related categories. TD Wealth PIA was rated 7.6 for compensation and 6.6 for bonus, down significantly from 8.1 and 7.5 a year ago. Odlum Brown was rated 8.2 and 7.8, respectively, compared with 8.9 and 8.2 in 2021.
TD has structured its compensation so that “you must jump through a bunch of hoops,” said an advisor with TD Wealth PIA in Ontario.
“They’re at the bottom of the chain” in terms of competitiveness, said an advisor with TD Wealth PIA in Quebec.
Craig Meeds, head of private investment advice with TD Wealth PIA, acknowledged the grid’s intricacies but said no major changes are planned.
“It is more complex than most other firms, and so we absolutely acknowledge it,” Meeds said. The pay and bonus structure seeks balance “between rewarding our advisors for running great practices, while also incentivizing the long-term growth and evolution of those practices.”
As for Odlum Brown, several advisors said the bonus structure could be more transparent.
Kim Abbott, Odlum Brown’s vice-president and director, sales and business development, said the grid is “fair” and that there’s an incentive pool that’s tied to production.
While the grid has been largely consistent for several years, “it’s not uncommon to have adjustments as the firm has grown,” she said. Further, Odlum Brown is conducting a survey that may lead to client satisfaction bonuses “down the road.”