Once again, advisors have proved that satisfaction with compensation is not just about the money. Those surveyed for this year’s Insurance Advisors’ Report Card told Investment Executive that there are other factors to consider when it comes to their firms’ compensation.
This is most apparent when observing advisors’ satisfaction scores: once their compensation has reached or surpassed the average payout, there is no corresponding uptick in satisfaction levels.
Rather, it appears that what is important to advisors — even more than the total amount they bring home — is having their earnings’ expectations consistently met. Insurance advisors show a distinct distaste for new contracts and changing compensation schemes.
Advisors’ access to a wider variety of products also has some bearing on compensation scores. Advisors at managing general agents, who have greater freedom to make objective product choices for clients, are more likely to be satisfied with their compensation.
World Financial Group Inc., Equinox Financial Group Inc., PPI Financial Group and Great-West Life Assurance Co. (the only insurer of this subgroup with dedicated sales agents) have come very close to bridging that gap between expectations and reality, as well as providing needed compensation support to advisors. (An Alberta advisor notes an “ease of book movement and flexibility to choose your payout contracts” at Equinox, for example.)
The remaining firms have some work to do to mitigate their advisors’ displeasure. Some advisors gripe about steadily declining commissions, while others continue to struggle with the unforeseen consequences of contract changes.
“The financial rewards were greater with the old contract,” a State Farm Insurance Cos. agent in Ontario says about the firm’s previous contract, which was changed in 1997. “I didn’t have to worry about chasing the carrot; it was straight commissions. With the newer contract, you have to make it up with bonuses of variable amounts.”
Even though Vaughan, Ont.-based WFG received the top score for compensation with an 8.9, the firm that registered the greatest improvement is Winnipeg-based Great-West Life. Its compensation score increased to 8.3 from 7.8 in 2005. Advisors at Great-West Life scored compensation 8.1 in importance.
Great-West Life’s best aspects, says an advisor on the East Coast, are “the flexible contract, good compensation and the support. The firm makes an effort to help people run and grow their businesses, which is just spectacular.”
There is one welcome change — one taken in response to advisors’ complaints — that may explain the bump in compensation scores. “This fall, we will be switching to weekly commission payment,” says Leander Dueck, senior vice president of individual distribution at Great-West Life. “This is to be more in line with the frequency of the marketplace.”
Infrequent commission payments has been an advisor beef for the past few years.
But other firms have not been as responsive to their advisors’ needs. Freedom 55 Financial has a sizable gap between its advisors’ scores for compensation (7.2) and how they rate it in importance (8.9).
A Freedom 55 advisor in Ontario suggests that this gap has been widening over time: “It’s been declining since I started here. That includes rewards and recognition.”
The firm’s advisors are paid commission on a scale based on their production and their assets under administration. They also receive bonuses based on where they are on the production scale, says senior vice president Nick Pszeniczny.
Freedom 55 — along with Hub Financial Inc. and WFG — have the majority of advisors at the bottom of the compensation scale.
Clarica Financial Services Inc. was the only firm that had a lower score than Freedom 55, with an even larger gulf between its compensation score (6.8) and the category’s importance score (8.8) from its advisors. Despite the fact that 70% of Clarica advisors surveyed reported earnings in the middle range, not all were prepared to extol the virtues of their firm’s level commission structure, which was introduced in the late 1980s.
Jack Garramone, vice president of the Clarica sales force, says the firm pays a level amount of the premium to advisors: “We have sales bonuses based on productivity on the sales side and on the insurance side of the business. So the most productive advisors are paid more.”
The rationale is to increase advisor productivity and reflect the cost of doing business, Garramone says. But even though some advisors say it is “outstanding in the long term,” many others protest that Clarica has been taking a bite out of commissions in recent years.
@page_break@”Wages have dropped seven times in 11 years,” says a Clarica advisor on the Prairies. “Because of the compensation, I wouldn’t recommend Clarica to other advisors. It only recognizes super-high producers.”
Their well-heeled counterparts at PPI had some unusual scores that demonstrate that compensation is a lower priority for advisors who are happy with their income level. PPI, which serves top-tier clients, has the highest percentage of advisors bringing in top-tier income.
PPI’s results show subdued scores in compensation (7.8), as well as its importance (7.7). But it doesn’t appear that PPI advisors are less satisfied with their earnings; rather, PPI advisors tend to place more value on the other things that grease the wheels of their business.
A PPI advisor in Vancouver says the firm has sweetened the pot with “fantastic work relationships, great people, excellent service and excellent compensation. It has the best agent contract in the industry and is responsive to my needs.”
A Quebec-based PPI advisor, who says there’s room for improvement in payout, is more than happy with the other perks: “We’re not quite there; I’d like to be in line with other producers. But the rewards for top producers are great for morale.” IE