Financial planners’ dissatisfaction with their payout structures was evident again this year, with average ratings in the category dropping at eight of the 16 planning firms surveyed. Payout percentages are declining at seven dealerships, account and regulatory fees are on the rise, and planners are reeling from added costs and less take-home pay.
“Less payout, lower grids, more fees,” is how one unhappy Ontario planner at Berkshire Investment Group Inc. sums up a common sentiment in the planning industry.
Indeed, the term “payout” might as well refer to how much planners are paying their own firms — not the other way around. “I pay them too much,” says a Money Concepts (Canada) Ltd. planner in the Maritimes. A W.H. Stuart & Associates planner in Ontario agrees: “We have a high payout ratio, but they nail us on account fees.”
And so it goes, virtually across the board.
Advisors at Toronto-based Assante Corp. are dealing with what president Joe Canavan calls a “realigned” payout grid, which was introduced in January. Canavan didn’t discuss the specifics of the new structure but he did say it favours larger advisors to some degree.
Assante planners were vocal in their agreement. “It’s two stories: for the big earners, payout is great; for the little guy, it’s a disaster,” laments a West Coast Assante planner.
Another Prairies planner concurs: “It’s catering to the top 10% of performers. If you read between the lines, you can see that if your book is less than $50 million, you don’t exist. And management is downloading costs.”
Assante planners’ payout averaged 66%, a whopping 10% drop from last year. The decline translated into an average overall rating of 6.4 for the firm, down from 7.0.
Sylvia Kovesfalvi, Assante’s director of communications, says the company had more than 200 payout structures in place as a result of the numerous dealerships that merged with Assante beginning in 1995.
The new harmonized grid is intended to “reflect our position as a growing dealer with top advisors,” she says. “We were trying to create a level playing field. We wanted a structure that was competitive, principled and responsive.” The new structure affects each planner differently, depending on the payout structures before the integration, Kovesfalvi says. Essentially, it means many lower-earning planners were bumped to lower grids, while top earners moved up.
Not all planners are crying foul over their pay structures. The biggest — and perhaps most surprising — gain this year was at Montreal-based Laurentian Financial Services, despite recent changes that some may not view favourably.
Stephen Cole, regional vice president of sales in Toronto, explains: “What we’ve done this year is increase the bands. For an advisor to move from one percentage payout to a higher payout, we have increased the level of gross dealer compensation he or she has to achieve.” This marks the first change in payout structure at Laurentian since 1993. Laurentian has not increased the compensation it retains, Cole says; the band increase was specific to each franchise because of the costs downloaded to franchisees over the past five years.
“For the most part, it’s been understood, but there are individuals who feel they’ve been unfairly treated,” says Cole. He is speaking to unhappy planners: “I’ll do my best to explain why we had to do this.”
Ratings were up a full point at Toronto-based Dundee Wealth Management Inc., at which planners gave payout an average score of 8.2
Winnipeg-based IQON Financial Inc. and Worldsource Financial Management Inc. of Markham, Ont., maintained last year’s ratings.
Markham, Ont.-based FundEx Investments Inc. took the top spot in the payout category this year, with an average rating of 9.8. In return for a set fee, its planners take home 100% of earned commissions, and services such as research, sales support and client prospecting materials are left up to them.
FundEx president and CEO David Vowles says the firm’s 100% payout is the driving force behind planners’ happiness, but it’s not a structure for everyone. FundEx planners are an experienced lot, he says, and don’t need the support offered by competing firms. “They are not attracted to us because we have a sales program or a marketing program. We don’t have the trappings of a sales machine,” Vowles says.
“They come to us because we provide great back office, great compliance and technology, and we pay out 100% of the commission.”