Money is flowing back into financial advisors’ pockets as the economy rebounds, but advisors aren’t completely satisfied, suggest the results of this year’s Dealers’ Report Card. That’s because many advisors want to see firms restore the non-monetary reward programs that got cut during the recession, indicating that a solid compensation package isn’t just about getting paid more; it’s also about being recognized.
Overall, advisors report increased payouts in this year’s survey. Of the 517 advisors surveyed, 9.1% are earning more than $500,000 in total compensation — an increase from 5.7% in last year’s survey. The increase in payouts helps explain why performance ratings in the “firm’s total compensation category” increased to 8.2 from 7.9 in 2010.
However, advisors say, non-monetary recognition programs are as important as money in a compensation package. And whether a firm had offered top-performing advisors admission to a certain club or tokens of appreciation prior to the financial crisis and ensuing recession, advisors want to see those non-monetary rewards restored.
As one advisor in Ontario with Mississauga, Ont.-based Investment Planning Counsel puts it: “They used to have a recognition program, but there has been nothing in the past few years. That pulls down my rating for the firm a bit.”
In fact, the dealer firms that had the top ratings in the total compensation category had maintained a solid mix of monetary and non-monetary rewards throughout the recession. These include Mississauga-based PFSL Investments Canada Ltd. , Ottawa, Ont.-based Independent Planning Group Inc. and Burlington, Ont.-based Manulife Securities.
PFSL, in addition to giving its advisors a payout that ranges between 50% and 65% on product sales, also offers its advisors “visual recognition” through peer recognition and stage recognition programs. For the latter, top performers are called up onto a stage during a quarterly, companywide meeting and recognized for their hard work. Head office also mails top performers custom-made T-shirts, wristbands and pins that those advisors can wear to signify their success.
“Getting money is good, but that goes directly into your bank account,” says Jeff Dumanski, PFSL’s president and chief marketing officer. “Being able to wear that success — and visually show others that you are being recognized for your hard work — goes a long way.”
IPG advisors, for their part, were happy with the flexibility of their compensation package. Many felt the firm offered high payouts, although it could up the ante a bit on its recognition efforts.
Says an IPG advisor in Ontario: “The compensation is very good relative to the marketplace, but there isn’t much in terms of reward and recognition.”
Currently, the payout grid at IPG ranges from 50% to 90%. For advisors who don’t want to work on a payout grid, the firm also offers advisors the chance to pay a flat fee of $18,000, for which they would then receive 100% commissions on what they sell. As for recognition, the firm announces its top performers at its annual sales conference.
Manulife saw its rating in the total compensation category rise to 8.3 from 7.7, the second-largest increase among the firms surveyed. Besides maintaining an 80% payout ratio throughout the recession, Manulife offers its advisors the chance to become part of its President’s Circle and Circle of Excellence. The former program is an event for the top 25 performers of the year, while the latter recognizes the top 100 advisors of the year. The events take place in alternating years.
One firm that has made non-monetary rewards a top priority is Toronto-based DundeeWealth Inc. In February, the firm launched what is known as the Quality and Excellence Plan — an internal report card that measures advisors’ success in five categories: compliance, diversity, qualifications, net new assets and fee-based business.
Broadening compensation beyond sales performance helps advisors stay focused on building quality relationships with clients, says Richard McIntyre, DundeeWealth’s executive vice-president and head of retail: “In this business, a lot of advisors get rewarded for their production but not on the quality of their business.”
Stability is also a critical component of how advisors perceived their compensation packages, both before and after the recession. This especially was the case for Richmond Hill, Ont.-based Global Maxfin Investments Inc. , which acquired Calgary-based Professional Investment Services (Canada) Inc. in late 2009.
Upon the deal’s closing, Global Maxfin advisors with PIS were worried that their flat-fee compensation packages would be altered. Much to their relief, management has left both Global Maxfin’s grid structure and PIS’s flat-fee models as they were prior to the acquisition.
As a result, Global Maxfin’s rating in the total compensation category rose by a notable 1.6 points, to 7.9 from 6.3, making it the most improved rating in the category.
“They didn’t screw around with our compensation model,” says a Global Maxfin advisor with PIS in Alberta. “[The executives] have been really supportive.”
Such situations reveal that while non-monetary benefits can play a significant role when it comes to advisors’ satisfaction with their compensation packages, the importance of having an attractive payout structure cannot be downplayed.
In fact, advisors with Tor-onto-based Assante Wealth Management (Canada) Ltd. were upset that their firm has not restored the grid payout levels that it had lowered during the recession. As a result, Assante had the lowest rating in the total compensation category, at 7.3.
“In 2008, compensation was reduced because of lower business volumes,” says an Assante advisor in Ontario. “Revenue has now returned to pre-2008 levels — but our payout grid has not been changed to reflect that.” IE