Advisors praise equity ownership, stable payouts

So, with commission levels taking a hit last year, it is no surprise that boutique firms that have strong equity-ownership programs, such as the aforementioned Wellington West and Toronto-based Richardson GMP Ltd., found themselves in the spotlight when it came to the “firm’s total compensation” category.

“Having the option to buy in is huge,” says a Wellington West advisor in Ontario. “Ownership is a big bonus, and that is how you are going to make money down the road.”

“The firm has several good things in its compensation model,” says a Richardson GMP advisor in Ontario. “The partnership model — access to increased partnership and the grid — is very strong.”

Although partnership programs and strong grids are essential to some advisors, others value consistency and stability. For instance, advisors with Calgary-basedLeede Financial Markets Inc. can breath easy knowing that their bottom line will remain consistent.

That’s because the firm’s compensation structure works without a grid, offering advisors a straight 50% payout regardless of market conditions. At the same time, advisors have the opportunity to bump up their payout to 55% when they hit certain incentives. The firm has not changed its compensation structure since its inception — and that is clearly paying off with advisors.

“The compensation is why I came here,” says a Leede advisor in British Columbia, “and the payout percentage is extremely fair.”

As a result, Leede is one of the few firms that has exceeded its advisors’ expectations when it comes to compensation, as they rated their firm’s performance a 9.3 in the category, surpassing the 9.0 they rated it in terms of importance.

But not every firm has managed to keep its advisors satisfied. In fact, unlike advisors at Leede, many others would have liked to have seen a change to their firms’ compensation models, as they felt the production targets were too high for the times.

“Targets are harder and harder to meet in order to maximize performance goals,” says an advisor in Ontario with Toronto-based BMO Nesbitt Burns Inc. “And the goals are unachievable unless your book is over a certain amount.”

“The compensation is poor because the grid is ramped up far too much,” adds a Nesbitt colleague in Ontario.

In addition, Nesbitt let go of approximately 100 investment advi-sors last June — 7% of its 1,300-strong advisor base at that time.

All this combined may have left a bad taste in some advisors’ mouths. It may also be the reason why the firm received a rating of 7.0 — not only the lowest rating in the category but the largest year-over-year drop, down from 7.7 last year.

Toronto-based ScotiaMcLeod Inc. suffered a similar setback, as advisors rated the firm at 7.3 in the compensation category, half a point lower than last year’s 7.8. As well, the gap between the importance rating given by ScotiaMcLeod advisors (9.1) and performance increased to 1.8 vs 1.1 last year, proving yet again that the bank-owned firm is not meeting its advisors’ expectations.

The drop in ratings could be because the firm took measures last year to ensure the retention of its highly productive advisors, making many others feel less than wanted.

“They have taken some of the compensation from the smaller-revenue books and reallocated it to larger books,” says a ScotiaMcLeod advisor in B.C. “What they are doing here is pushing out the smaller advisors.”

But firm executives say they wanted to put the power back into the advisors hands when they decided to change the compensation model by enhancing the performance partnership plan. The program was renamed as the ScotiaMcLeod Partnership Plan, and the firm added a 2% bonus on annual revenue for those producing more than $900,000 annually.