Although compensation doesn’t rank in the top three categories in terms of what advisors value most, it certainly plays a role in what an advisor looks for when choosing a place of employment. And compensation isn’t just about the dollars anymore; advisors are taking into account the bonuses and incentives that firms are offering.
“We make really good money,” says an Edward Jones advisor in Ontario. “The firm also takes care of our overhead and the bonus is based on the branch. As well, we get two trips a year, a pension adjustment and an RRSP contribution.”
Mississauga, Ont.-based Edward Jones is widely known for its travel and limited partnership incentives. With an overall score of 8.6 in the category, the firm proves that rewards are definitely becoming a greater part of the total compensation package.
“The rewards are fair for everyone,” says another Edward Jones advisor in Ontario. “As long as you meet the criteria, you go on a trip.”
Adds yet another Edward Jones advisor in Ontario: “The profit-sharing and partnership bonuses are not out of reach for the ordinary guy.”
Edward Jones has five levels of compensation: commissions, deferred profit-sharing, bonuses, limited partnerships and opportunities such as “all expenses paid” trips twice a year — the last incentive is the best aspect of the firm, according to an Edward Jones advisor in Ontario.
When it comes to commissions, Edward Jones doesn’t have the typical pay grid; all advisors are paid out equally, whether they are rookies or 20-year veterans. When it comes to bonuses, however, it is simple: the more an advisor produces, the bigger the bonus, says Gary Reamey, principal and head of Edward Jones in Canada.
“The problem with a grid, from our perspective, is that it rewards the people who have been there the longest and penalizes the people who have been there the shortest,” he says. “This way, everyone gets the same payout; then our most experienced and successful advisors are the ones who get bigger bonuses, bigger retirement plan contributions, more ownership and limited partnership.”
Certainly the bank-owned investment dealers have their issues. Advisors at five of the six bank-owned firms gave the importance of their firm’s compensation package a higher rating than their firm’s ability to deliver. This disparity showed up quite vividly at Toronto-based ScotiaMcLeod Inc. , at which advisors scored total compensation a 9.0 in importance, but only rated their firm’s performance a 7.5. Similarly, advisors at Toronto-based TD Waterhouse Private Investment Advice gave a score of 9.0 in importance, but only 7.2 in performance. And Toronto-based CIBC Wood Gundy saw the biggest gap, with advisors awarding an 8.9 for importance and only a 7.0 for performance.
“The firm,” says a Wood Gundy advisor in Ontario, “is uncompetitive [in comparison] to independent firms.”
Adds a BMO Nesbitt Burns Inc. advisor in Ontario: “The payout is not as high as in other firms.”
Adds a TD Waterhouse advisor in Ontario: “Our platform is not on par with the rest of the Street.”
TD Waterhouse, like most of the bank-owned firms, has a grid model. It offers an average payout of 46.6%, in a combination of cash and deferred compensation that ranges from 3.5% to 7.5%.
“Looking at the cash grid, it is very normalized in the industry,” says Mike Reilly, president and national sales manager with TD Waterhouse. “Every firm is different: some may have a lower cash grid and a higher deferred portion. We are in the middle ground, where we have found a good balance. We are competitive on the cash grid and give great incentive on the deferred.”
Toronto-based RBC Dominion Securities Inc. has an average payout in the high-40% range. DS’s compensation also includes a participation program that can bring the payout up to the 54%-56% range.
ScotiaMcLeod’s grid is based on fixed time and production; it has an average payout of 52%. As well, ScotiaMcLeod advisors can earn additional payments through the firm’s partner-participation program. “This depends on whether an advisor is growing his or her business, what size [of book the advisor has] and the profitability of the firm,” says Hamish Angus, head of ScotiaMcLeod. “This has been one of the best years for compensation programs.
“What the compensation program does is connect us to the teams,” he adds, “helps us look for ways to be more profitable, rewards the advisors for helping the firm be more profitable and gets everyone in the firm rolling in the same direction.”
@page_break@No doubt what sticks in the craw of advisors at the bank-owned dealers are reports of compensation packages at the independent firms. Word on the Street is that the latter comprise higher payouts and it is well known that many include direct ownership in the firms. If advisors at bank-owned firms get a chance to participate in stock-purchase programs, it is for shares of the parent bank. For this reason, bank-owned brokerages may always find themselves ranked in the bottom six when it comes to compensation.
At the top of the ratings are boutique firms Richardson Partners Financial Ltd. (9.5) and GMP Private Client LP (9.4), both of Toronto, followed by Winnipeg-based Wellington West Capital Inc. (9.3) and regional independent Leede Financial Markets Inc. of Vancouver (9.3).
“I felt like I had the carrot dangling in front of my face, with a stick in the back of my head all the time,” says a Leede advisor in the West about the firm for which he previously worked. “At Leede, it’s a lot more competitive and fair on commission payouts — and the firm doesn’t take money off the top and steal from you.”
Of 130 employees at Leede, 100 are shareholders. At Wellington West, 98% of the firm is owned by people employed at the firm. At Richardson Partners, all advi-sors are shareholders and equity is based on an advisor’s business.
“With ownership comes responsibility, which our partners find to be very important in terms of being a member of the firm,” says Sue Dabarno, president and CEO of Richardson Partners. “Our advi-sors always know what is going on in the firm, from the top down. And while the bank-owned dealers prohibit any kind of open communication, we don’t have any hidden agendas. The advisors are always involved in the affairs of the firm because they are not only advisors, but they’re also business owners.”
Recognition is another major topic of interest to advisors. Although trips are definitely a driver, firms are also doing it through high-producer clubs that come loaded with benefits. Although the bank-owned firms have lagged in other areas, they excel at recognition. DS has the Chairman’s Council for its top 55 advisors and the Executive Council for the next 230 advisors, recently expanded from 220. Also new this year is the Directors’ Council, an added category to recognize another 250 advisors.
“We thought there was a group of advisors that weren’t getting enough recognition,” says David Agnew, DS’s national director, “a group of advisors that are very important to our business who weren’t being recognized on an incentive trip. So, we put one together.”
TD Waterhouse has its prestigious President’s Club, in which top advisors qualify for the “Black Card Service,” an elite program that gives advisors the ability to obtain preferential interest rates, front-of-the-line service on the fixed-income desk, front-of-the-line marketing and their own back office.
“Membership,” Reilly says, “really does have its privileges.” IE