Advisors want balance of payout, equity, perks: Includes Chart

Here’s how it works: As a firm, PFSL takes 20% of all mutual fund commissions and distributes the remaining 80% to its sales force, based on the advisors’ previous sales and the size of their books, a model that is typical across the industry. But the magic is in the hierarchical compensation model, says Jeff Dumanski, PFSL’s president and chief marketing officer.

“If you come in as a new guy, you’re at a 25% payout,” he says. “The people above you are taking the rest. And, of course, they’ll have overrides from other people on down-line sales. That increases the compensation for themselves.”

Those at the bottom of the pecking order may not be impressed with their 25% payout, but they soon get the chance to earn more. Within a few months, a new advi-sor could jump to a 40% payout; and within a few years, the hard work can pay off, Dumanski says.

“The top level is the regional vice president,” he says. “That comes with recruiting people and doing production. At that point, you’re probably responsible enough to be a branch manager. You provide the office facilities and everything for your down-lines.”

Meanwhile, even though there’s no official equity program at PFSL, the firm has what it calls a “capital accumulation program” for the top 5% of advisors through which it awards stock in its parent company, Citigroup, at a 25% discount. “That’s based on length of time in the business, production and cash flow,” says Dumanski. “But the goal is to reward the builders and incent the people to build the teams.”

If 100%-plus compensation and an opportunity to own shares in the parent company weren’t enough to please senior PFSL advisors, the firm added a volume-based bonus for its top 150 advisors last year; and, for the second year in a row, top advisors are also headed to a sales conference in the U.S.

Advisors at Markham, Ont.-based Professional Investment Services (Canada) Inc. gave their firm an overall 8.7 rating in compensation, second only to PFSL. The majority of the firm’s 105 advisors are still on a flat-fee model, a remnant of Generation Financial Corp.’s compensation structure before it was acquired and rebranded as PIS late last year.

However, PIS president and CEO Ken Rousselle expects more advi-sors will move to its grid-based model, which offers advisors a 75%-90% payout in exchange for a more robust service offering, including training and business development services. One advantage of the grid model, Rousselle says, is that advisors can generate revenue from any number of sources.

“Advisors can derive revenue from insurance or through our strategic partners on the products side, [which] could be referring advi-sors to us,” he says. Advisors on the grid model who meet revenue targets are also eligible to buy shares in the parent holding company, Professional Investment Holdings Group.

Assante Corp., Dundee Wealth Management Inc., GP Wealth Management Corp. , all based in Toronto, as well as Waterloo, Ont.-based Manulife Securities International Ltd. , had compensation scores with big improvements this year. Each firm was at the bottom of the pack last year, but bumped up its score by at least half a point — perhaps owing to the success of equity programs, which are less common in the planning industry than in traditional brokerages.

Dan Brintnell, executive vice president and co-head of Dundee’s retail division, ranks his firm’s compensation in the industry’s top tier. Advisors agree: the firm’s score jumped to 8.4 this year, the third-highest rating in the category.

@page_break@Like many firms, Dundee runs two models: one is a corporate employee model in which advi-sors keep about 55% of their commissions, but pay no business operation costs; the other is the independent model, in which advisors take about 85% of commissions on mutual funds and 65% on securities, but shoulder the cost of running their offices.

Dundee also offers a stock-purchase plan. If advisors reach $100,000 in sales, they can allot 1% of their take to Dundee shares, and the firm will match half the advisors’ contribution. Advisors with $350,000 in annual sales can also allot 1% to Dundee shares, and the firm will match their contribution.

Burlington, Ont.-based Berk-shire-TWC Financial Group Inc. also offers two compensation models, both with an equity component. “When people have skin in the game, they work harder and they care more about the business,” says Glenn Pittman, senior vice president of business development and marketing at the firm.

Assante and Winnipeg-based Investors Group Inc. both have points programs in the form of performance-based, “near-cash” compensation. Points are redeemable for services such as marketing and training, and for benefits such as dental and disability insurance.

“It is a good balance with income and business assets,” says an Investors Group advisor on the West Coast. The firm, which received a compensation score of 8.3, ranked in the top half in the category again in this year’s survey.

Another advantage to a points system: dealers can tailor the program to coincide with their business strategies. At Assante, for example, points are accumulated more quickly when an advisor sells managed portfolios. A third-party managed program, for example, scores higher than a tech fund.

Assante also offers an equity kicker. As of this year, the 300 Assante advisors who achieve the highest scores in the firm’s points program have the option to take CI Financial Income Fund units, which vest for three years before they’re available for sale. Advisors moving to Assante from other firms are also offered some part of the package in equity.

Many firms do rake back certain fees on a “cost-recovery basis” but it’s difficult to know how transparent these fees are if they are bundled: Mutual Fund Dealers Association of Canada, Investment Dealers Association of Canada and other licensing fees; computer and software costs; or marketing and sales material, for example. IE