When it comes to compensation, Van-couver-based investment dealer Leede Financial Markets Inc. is the big winner in Investment Executive’s first annual Regional Dealers’ Report Card, with a score of 9.3.

Hot on its heels is Generation Financial Corp. , the Calgary-based mutual fund dealer, which scored a stellar 8.7 in the category.

What do the two firms have in common? A payout structure that compensates advisors equally — regardless of the size of their book.

At Leede, all advisors receive a minimum 50% payout. “Everyone is getting the same percentage,” says president and CEO Robert Harrison. “They can go up, but they can’t go down.” (If advisors achieve a certain production level, they’re rewarded with a 55% payout.)

At Generation, advisors receive a payout equal to double that of Leede’s, albeit under very different circumstances: “We have a desk-fee model, with 100% commission payout. Most firms operate on some sort of a commission split, so our desk-fee model immediately distinguishes us,” says president Ken Parker. “At the moment, among companies that do offer a desk fee, ours is the lowest.”

In exchange for 100% payout, advisors pay a portion of their back-office costs, their registration fees and their assistants’ salaries.

Advisors with Generation overwhelmingly expressed a belief in the superiority of their model. “We have a different model, and for anyone producing enough business, it’s a better model. Generation can also plan better for its budget,” says a Generation advisor in Alberta.

“It’s a full payout, so that’s incredibly important,” adds a colleague. “That’s one of the reasons for chang-ing to this firm.”

There’s another reason many advisors laud the compensation schemes at their regional dealers: there is an opportunity to obtain equity ownership in the firm.

That is certainly the case at Leede. The firm’s 50% payout isn’t the highest among the surveyed dealers, but Leede advisors aren’t complaining. “Payouts are very generous and equity ownerships are very generous,” says a happy Leede advisor.

A PIECE OF THE PIE

At Generation, some advisors own equity in the firm as part of a past equity-owning program. But Parker is unsure whether the firm will continue that program.

At the two regional firms with the longest histories — Vancouver-based Odlum Brown Ltd. , which has been around for 83 years, and Montreal-based MacDougall MacDougall & MacTier Inc. , which has a history dating back to the 1850s — advisors are more concerned with the ownership of equity than compensation per se. They place a lot of emphasis on getting a piece of the pie; when they aren’t invited to the table, they get frustrated.

“The firm is 150 years old and it is difficult to obtain shares,” laments one 3Macs advisor. “The shares come available when someone retires. But no one is retiring.”

Similar sentiments were expressed by at Odlum Brown. “The distribution of shares within the firm is political,” says an advisor. “Day-to-day compensation is very fair, however.”

In terms of how advisors become eligible to own equity: “It is a somewhat subjective process,” admits 3Macs president and CEO Tim Price. “Ultimately, the allocation of shares in our firm is approved by the board of directors. It is based on contribution, which can be from a revenue production, management or a governance perspective. It also reflects seniority, so the longer you are at the firm — all things being equal — the more likely you are to have more shares.”

Ross Sherwood, president and CEO of Odlum Brown, says an advisor’s eligibility to own equity depends on a number of factors: “You get shares because of your contribution, which is based not just on your production. It’s based on attitude — being a team player — as well as your production. But we have people in client services that are shareholders. We like to have everyone involved, everyone engaged.”

START AT 70%

Like Generation, Calgary-based Portfolio Strategies Corp. offers a flat-fee option (advisors pay $15,000 annually), but the model is “available to a very few people,” says president Mark Kent. The vast majority of advisors operate on a grid. “We pay above average. Our new advisors start at about 70%, and that can go up to the high 80s.”

Advisors at Portfolio Strategies apparently are satisfied with the payout structure, as they gave their firm a score of 8.1.

@page_break@“The payout is really good. There is no recognition program, which is also very good. I deplore the fact that this industry is so focused on sell, sell, sell,” says a Portfolio Strategies advisor in Alberta.

Saskatoon-based Sentinel Financial Management Corp. has a fairly modest payout, an average of 71.6%. But president and chief compliance office Merlin Chouinard is unapologetic about it.

“One of the great harms that has been done in our industry is the payout for the reps has been too high,” he says. “When I started at Sentinel, I said, ‘I’m not going to do this — we are going to keep enough money for the house so we can be a very strong financial firm unto ourselves and our agents never have to apologize for us. And we never have to cut corners or hand down fees and payments to them.’ And that’s what we did.”

Although the company’s payout percentage is lower than that of some other firms in the survey, Sentinel advisors do not have to pay for any of the services they receive, which is something the firm’s reps acknowledge and appreciate.

“There is much more to it than how you get paid,” says a Sentinel advisor.

But other Sentinel advisors did express a desire for increased compensation. When commenting on the worst aspects of the firm, one Sentinel advisor says: “They can always improve compensation … more money!” IE