Advisors at dealer firms have taken a hit during the recession. And although their businesses are bouncing back, most compensation, rewards and recognition programs are not. Thus, many advisors say they are not pleased their firms have yet to adjust their compensation packages during the recovery.
As global stock markets plunged, many firms adjusted their payouts, and advisors are still feeling the effects. The percentage of advisors surveyed for this year’s Dealers’ Report Card earning less than $100,000 has risen to 37.1% from 33.9% year-over-year, while the percentage of advisors earning more than $500,000 fell to 5.7% from 9.1%. (Those earning between $100,000 and $500,000 has remained at 57%.)
Thus, it’s no surprise that performance ratings for “firm’s total compensation” have dropped by half a point or more at four firms — Toronto-based Assante Wealth Management (Canada) Ltd., Burlington, Ont.-based Manulife Securities, Montreal-based Peak Financial Group and Richmond Hill, Ont.-based Global Maxfin Investments Inc. — whereas only one firm — Toronto-based DundeeWealth Inc. — saw its rating increase by a similar margin.
Assante advisors rated their firm at 6.9 in compensation vs 7.4 in 2009; they are particularly displeased that cuts made during the recession haven’t been reversed. “During the crisis, Assante cut the [payout] grid,” says an advisor on the East Coast. “It took top-line revenue out of the producers’ hands. But the crisis is over now.”
Assante advisors saw their payouts cut to 82% from 85% in late 2008/early 2009. Additionally, there was a reduction in all compensation-related programs. “We’ve been bringing programs back now that markets have recovered,” says Steve Donald, Assante’s president and CEO. “We’ve been reintroducing things such as educational retreats. We have maintained our equity programs. The structure of the grid [will] come back as assets come back. There was a reduction in tiers, but people [will] move up in tiers as assets grow.”
Advisors with Manulife, who rated their firm at 7.7 vs 8.2 in 2009, would also like to see their company work on its compensation package. In fact, several advisors cited compensation as the aspect the firm could most improve upon.
Manulife introduced a new grid in 2008 to blend its grid with that of Berkshire-TWC Financial Group Inc., acquired in 2007. Manulife president and CEO Rick Annaert says the firm hasn’t changed advi-sor compensation since.
But now that stock markets have recovered, Manulife advisors say they want to see an equity program and incentives introduced. “I’ve been with other firms,” says an advisor on the East Coast, “and they definitely had better rewards and recognition programs.”
Annaert admits that there has been demand for an equity program: “But the challenge is: when we pay 82% gross commissions to advisors, there’s not a lot left to be granting all kinds of perks.
@page_break@Meanwhile, Peak advisors rated their firm’s compensation at 8.1 vs 8.6 last year. They say the reduction stems from the disjointed nature of the firm’s compensation program.
Robert Frances, Peak’s president and CEO, says the firm’s compensation package differs in each of the provinces and within the various subsidiaries. As well, a lot depends on how the branches deal with advisors at the local level.
“I question what they do with their share,” says a Peak advisor in Ontario. “The branch does more for me than the dealer. It should increase our compensation.”
Advisors with Global Maxfin rated their firm at 6.3 in the category. Last year, the firm acquired Professional Investment Services (Canada) Inc., which had previously participated in the Report Card. PIS’s rating in the category was 8.3 in 2009. The wide rating difference may be accredited to the acquisition, as there appears to be more confusion than dissatisfaction with compensation. “[The firm] has not been aggressive about finding out what is going on or dealing with it since it bought us,” says a Global Maxfin advisor in Alberta.
Global Maxfin has two compensation models: an integrated grid and a flat fee. The firm has made no changes to its grid, but PIS did before the acquisition, which could account for some of the advi-sors’ dissatisfaction. Says executive managing director Richard Pyper: “There’s no intent to get rid of either the flat fee or the grid, or to move advisors to one or the other.”
Unlike the firms previously mentioned, advisors with DundeeWealth rated their firm higher in total compensation by more than half a point vs 2009, at 7.9 vs 7.3. The main reason appears to be that the firm did not adjust its compensation during the recession. “That was a deliberate attempt to support advisors through the tough times,” says Richard McIntyre, executive vice president, retail. “If we had cut the compensation at that stage, it would’ve been a devastating blow.”
Advisors with Mississauga, Ont.-based PFSL Investments Canada Ltd. and Ottawa, Ont.-based Independent Planning Group Inc. rated their firms highest in the category, at 9.3 and 8.6, respectively. Neither firm had adjusted its compensation structure during the recession.
IE