Attention recruiters: the way to an advisor’s book may well be through his or her wallet. Most advisors surveyed for this year’s Brokerage Report Card say they have switched, or would think about switching, firms because of compensation and payout, although overbearing companies and disservice to clients were also reasons for jumping ship.
In this year’s survey, CIBC Wood Gundy and RBC Investments brokers noted a company push toward fee-based business. And the reps who most frequently say they’d readily leave for more money are those at TD Waterhouse Investment Advice. “This new grid is not making anybody happy,” says a TD Waterhouse broker in the West.
In addition to generous compensation, the simplicity of the grid also seems to be a factor. Canaccord Capital Corp. brokers gave their firm top rating for payout, calling its compensation structure “tops.” “I don’t want to go too high or else they’ll think we’re overpaid,” jokes one broker in British Columbia. Canaccord took second place overall in this year’s Brokerage Report Card.
According to Bob Larose, Vancouver-based Canaccord’s national sales manager and executive vice president, the generosity of the firm’s payout structure is no accident. The strategy is simple: the advisor brings in the client and the firm splits the revenue 50/50. “It’s one of our selling points,” says Larose. “For most guys, it’s very appealing.”
Larose says this makes it far easier to grow the top line rather than squeezing expenses and angering clients and advisors. “If I keep all the brokers happy, I can recruit more of them and grow our revenue,” he says. The strategy appears to be working: the company recruited 56 brokers from bank-owned firms in the past year.
Other firms, too, are earning kudos for payouts. First Associates Investments Inc., a wholly owned subsidiary of Toronto-based Rockwater Capital Corp., ranked third for its payouts with an average score of 8.4, up from last year’s third-place score of 7.6 given by brokers at Yorkton Securities Inc.
Yorkton’s private client group was bought by Rockwater and folded into First Associates late last year.
“We have a simple grid,” says Bill Fulton, COO and deputy chairman at Toronto-based First Associates. “You don’t need to be a mathematician to figure it out.” The firm has three payout levels based on gross monthly production. “We don’t have a ticket grid, just gross production. If you hit your target, you know what you get paid.” The firm’s top payout is 52% for sales of more than $50,000 a month.
At ScotiaMcLeod Inc., advisors don’t usually mention compensation as a reason for switching firms despite the fact the firm is rated one of the lowest for payout.
ScotiaMcLeod and RBC Investments ranked 10th and 11th, respectively, scoring 6.3 and 5.6.
BMO Nesbitt Burns Inc. advisors call their payout “crappy” and sum up the situation with comments such as: “Make the same, get paid less.” One Nesbitt advisor from the Prairies laughs when asked to rate the payout, while a Toronto colleague warns: “More work every year for less payout leads to errors.”
Nesbitt took last place in the payout rankings with an average score of 5.4. “The constant clawbacks in payouts — we are being paid more and more like bankers,” says one Toronto advisor. “We assume all the risk and we have no pension.” He says he’d consider switching for a better payout, and suggests there will be more boutique firms springing up in the future.
Despite ranking first place overall, Edward Jones advisors had complaints about compensation practices. The firm places more emphasis on intangibles such as partnership, vacations, regional meetings for brokers and their families and the group retirement plan than payout — and some brokers object.
Gary Reamey, head of the firm’s Canadian operations based in Mississauga, Ont., says Jones compensates according to investment categories instead of using a grid. Reamey says the payout is 40% for bonds and insurance investments, 35%-40% for mutual funds and 25%-45% for stocks.
The kindest words for the company’s payout, ranked fifth overall with an average score of 7.9, came from a B.C. broker who said simply, “It’s OK; it’s a trade-off.” Yet several brokers in different parts of the country say they are among the worst-paid brokers in the industry. “They talk about partnerships and trips, but that means nothing to us,” says one West Coast broker.