Pay us like brokers, bankers say

The convergence of bankers and brokers has been in the cards for a long time, at least since the banks began buying up the brokerages in the late 1980s, but only in the past year or so has the complete blurring of the roles finally started to happen.

For example, CIBC has designs on completely obliterating the line between bankers and brokers. Not only has it begun licensing some bankers to sell securities, but it also has these dually licensed people reporting to its wealth-management division, along with the full-service brokerage force and other traditional retail investment businesses.

The strategy makes ultimate sense from the banks’ point of view. But if the goal is a bigger slice of the client’s wallet then banks must equip themselves to work their way into that wallet regardless of how the client comes to deal with the bank.

It makes sense to have bankers who can step up and play like brokers rather than risk a clumsy intramural hand-off. But this strategy doesn’t come for free.

If bankers are going to play like brokers, they are going to have to be paid like them, too. And so far, the bankers say that this is not happening.

Banks have been slow to figure out exactly how to finesse this thorny issue.

It is perhaps no surprise then that CIBC, the bank that is most advanced on the march to make bankers as versatile as possible, also receives the lowest marks from its sales force for the fairness of its compensation. One disgruntled CIBC banker in the Prairies slams compensation as the worst aspect of working for CIBC, noting, “It’s brutal compared with how highly educated we are.”

Without appropriate pay for their efforts, bankers are feeling unloved, underappreciated and generally unhappy.

The importance of compensation to bankers’ overall happiness could safely be assumed, and the Bankers’ Report Card survey confirms that there is indeed a close correlation between the bankers’ perception of the appropriateness of their pay and the overall score they give their companies.

Lowest rank

So CIBC, the bank ranked lowest by its staff for fairness of compensation, ranks second-to-last overall in our survey. The other two banks that report below-average scores in fairness of compensation, National Bank of Canada and Laurentian Bank of Canada, also appear at the bottom of our overall rankings.

“It is not noted for paying well,” says one Ontario banker with Laurentian Bank.

The same correlation between satisfaction with compensation and bankers’ overall happiness is evident at the top of the survey rankings, in which TD Canada Trust ranked highest in both categories. Bank of Montreal ran second in each category.

Not all TD’s bankers are completely satisfied with their pay, of course. They have their complaints, and naturally yearn to earn more, but one TD banker in the Prairies concedes, “From what I have seen, we are well-paid.”

That said, none of the banks’ sales forces are completely satisfied with pay.

The national average score for fairness in compensation ranked third-to-last among all the categories surveyed.

The only areas in which bankers are less satisfied is in the categories dealing with the pressure they feel from their managers, both to accumulate assets and to refer clients to other areas of the bank.

It all seems to come down to whether bankers are receiving enough incentive compensation for the work they do.

“They want to give commissions, but on the other hand they don’t,” observes an Ontario-based Laurentian banker.

This complaint is a familiar one all across the banking industry. One Royal Bank of Canada foot soldier in the Prairies rates the compensation structure at Royal Bank as the worst aspect of his company. “We should be paid for the size of assets we control — in other words, by commission,” he says.

The fundamental dilemma the banks face is how to introduce appropriate performance-based compensation to maximize sales and retain quality staff without dismantling the stable and predictable cost structure that comes from maintaining a purely salaried staff.

Thin margins

Banks don’t want to turn their traditional retail banks into operations that are generating highly variable fee business, but only managing razor-thin margins because of all the variable compensation that they must pay to generate those fees.

The banks have become extremely adept at turning the trick in their own brokerage house subsidiaries — cranking up the sales, while they steadily ratchet up their own margins.

But the move to push retail investment business through the bank branch networks remains very much in the early stages.

Banks may be accustomed to treating their front-line employees like drones, but if they expect to get a real wealth-management kick through their branches, they are going to have to improve the opportunity to earn for their solid producers, or grow used to watching them walk out the door for greener pastures. IE