Compensation: High payouts may come with a price

With an average payout of more than 75%, IPC offers its planners template Web sites, brochures, front-office technology, personalized newsletters and training on practice management and estate planning. But whether advisors choose to use them is up to them. “It’s there for the taking,” says Reynolds.

Planners at London, Ont.-based Cartier Partners Financial Services Ltd., whose payouts average more than 77%, rated things such as advertising, sales support and prospecting materials the poorest among the services offered by the firm. Yet Cartier’s payout rating, with an average score of 8.1, was higher than average.

Cartier president Paul Hogan recognizes the task at hand. “It’s challenging for any dealer to enhance services beyond simple order processing, problem resolution and data quality at a payout above 75%,” he says. “It’s difficult, but not impossible.”

Hogan points to consolidation as a major factor in a firm’s ability to offer more support with a high payout. “No one sets out to consolidate; it’s an outcome of other objectives,” he says. “We’re trying to build a dealership with the size and scale to compete.”

Planners at Cartier are left to their own devices in terms of advertising. “We see that as a local branch priority and objective,” says Hogan. And while he has heard a few complaints among advisors, he’s confident that for the experienced planner, this is the right way to go. “To create a firmness in who’s responsible for what — that takes time.”

The payout structure at Burlington, Ont.-based Berkshire Investment Group Inc. is different. “Our payout grids are based on level of production and level of education,” says Geoffrey Charlton, vice president, national sales. Advisors in the corporate office who have or are working on designations such as a CFP receive a payout of 70% if their gross commissions are between $100,000 and $150,000. In this case, Berkshire will cover some of the overhead costs.

Planners in the associate offices, however, use their higher payouts to cover all their own expenses and get nothing from Berkshire in terms of support. “That’s up to the associate office owner,” Charlton says. Corporate registration fees for the Mutual Fund Dealers Association, transaction fees, forms and information technology costs are all absorbed by the firm.

The ultimate compensation is offered by Markham, Ont.-based FundEX Investments Inc. At 100% payout, advisors at FundEX were the most satisfied with their compensation, rating it an average of 9.8 — almost one full point above Berkshire’s second-place payout satisfaction rating.

“They’re so good at what they do, they’re transparent,” says a happy FundEX planner in Ontario. “I never have to call head office. I’ve never had any problems.”

Fellow FundEX planners agree. When asked about the best aspects of their firm, many planners cited its non-intrusiveness. “They just about don’t exist,” says a planner from Ontario. “Except for the occasional golf game, they’re pretty much invisible.”

That invisibility, for the most part, is seen as one of the firm’s strongest assets. “They’re an efficient mutual fund dealer and they do an excellent job of mutual fund services,” says a FundEX planner in Manitoba. “They don’t try to justify their existence though needless support and hand-holding.”

For FundEX CEO David Vowles, planners’ happiness isn’t a surprise. “Money talks!” he laughs. “We really appeal to the advisors who have been in the industry for a number of years. They don’t need training, and they resent having to pay for it.” Planners at FundEX can expect the best compensation in the industry, top-notch technology and independence, Vowles says.

But advisors pay the price for a 100% payout. “I’ve been to so many companies that when you get to FundEX, you have to be prepared,” explains an Ontario planner. Services are limited to those that meet regulatory concerns (such as compliance) and a head-office “administration response team” that answers questions that may arise on a day-to-day basis.

In terms of marketing support, FundEX advisors are on their own; there are no preprinted marketing materials or brochures. “Their brand is their visibility in the community and the service they provide to clients,” says Vowles. FundEX also sponsors an annual networking gathering at which education programs are available to those who want it.

While those at high-payout firms typically rated their sales support poorly, it doesn’t necessarily imply dissatisfaction. Says one British Columbia-based Berkshire planner: “I’ve been in the business long enough; I don’t need someone telling me what and how to sell.”
A FundEX advisor in Ontario repeats the sentiment: “If you need hand-holding, go give some other firm 25% of your paycheque.”

A more common complaint among planners at all firms was the trickling down of expenses. Says an IPC advisor in Ontario: “If I ever left my firm, it’d be because I was fed up with IPC nickel and diming us to death.” While it’s a criticism faced by many of the higher-ups in the industry, many call the passing down of expenses an inevitable trend. “It’s the new reality of the industry,” says IPC’s Reynolds. “MFDA fees are coming in, and it’s not necessarily the fault of the dealer.”
As for making the eventual move to an Investment Dealers Association of Canada-style grid payout, Vowles doesn’t see the need. “The only reason a dealer would move to an IDA grid is to take excessive commissions unfairly from the advisors in return for marketing materials that don’t necessarily add value to their business,” he says.

But as planners are making more — and making do with less — success still hinges on the amount of business they can generate. As Reynolds puts it: “At the end of the day, it’s not how much you get paid; it’s how much you make.” IE