Although the financial services industry has changed dramatically in recent years as it has moved away from the traditional “four pillars” configuration, advisors continue to work under old payout structures.

In some ways, there is no rhyme nor reason to this. All of the jobs involve selling Canadians financial services and products — much of which are prepackaged, managed products — yet the level of pay is surprisingly varied. In fact, the structure and variation of compensation says more about where the businesses have been than where they are headed now.

For the most part, investment advisors, financial planners and account managers at banks and credit unions across the country — regardless of the size of their employers — claim they are content about the compensation they receive. On average, they give total compensation a respectable score of 7.8 in this year’s Report Cards. And, given the variation in structures and levels of compensation, the uniformity of compensation scores across each distribution channel is striking.

Yet, if Investment Executive’s comparative data shows anything, it is the rule of relativity. Brokers, whose model annual income bracket ranges bet-ween $100,000 and $500,000, are only marginally happier than their cousins down at the bank branches, most of whom do not break the $100,000 barrier. And advisors at smaller, regional dealerships are happier than everyone, even though a great number of them are paid less than the industry mean. (Regional dealers includes four mutual fund dealers and three investment dealers)

But if the service that each advisor gives his or her clients is valued in exactly the same way, then the differences are even more striking. You might argue that investment advisors and financial planners tend to be more educated and possibly deserve better pay. But that is probably a generalization.

After all, many insurance advisors and account managers have acquired or are studying to acquire their certified financial planner designation or some other professional title. Likewise, many veteran brokers are perched atop the pay ladder with a securities licence that was framed and mounted years ago. Although most have updated their training, the rungs below them are mostly climbed using experience and sales acumen. So, education and designations are not the determinants of higher pay.

More often, it seems, it is the financial wherewithal of the client that is the determining factor.

It could be argued that investment advisors — who are closest to the source of the bountiful investment-banking deals made inside the brokerages — simply sit back and enjoy themselves as the liquidity on Bay Street and from boardrooms all over the country washes over them. And that sets an impossibly high standard for the rest of the industry to meet.

Account managers at the banks probably feel the weight of the system more than most. Upstairs, their coddled brokerage brethren rake it in — as their shared employer continues to post record profits — while account managers’ compensation is generally rigged to the old bank teller days. Most banks and credit unions offer some combination of salary and bonuses; account managers at banks and credit unions don’t receive commissions for any of the work they do, with few exceptions.

Higher-level managers make good commissions, and incentives such as free CD players and bonus reward points for credit cards are also common. But that does not compare with the trips to southern France, China, Hawaii or the Caribbean offered to the chairman’s or president’s clubs at the brokerages.

“Compensation is up to industry standards,” says one Bank of Montreal account manager. “But the bank pays us fairly low for what we bring in — and I do not see any signs that it will improve.”

Mutual fund dealers tend to be the most varied and resourceful when it comes to structuring compensation. Their grids are all over the map; some firms offer several models. These range from a straight grid to a tiered grid, and corporate payout is broken down into a further grid at the branch level.

Other firms — particularly full-service planning firms — simply try to look like brokerages, as they offer Investment Dealers Association of Canada trading platforms. Yet, these dealerships aren’t making enough money on the margins. And, so far, they’ve failed to shoehorn their way into many investment-banking deals — where all the profits lie.

@page_break@However, mutual fund dealers are working in a volume-driven business. And no matter what level on the commission grid they are, advisors at these firms are most likely to complain about the rising costs of doing business — of back-office services, compliance, and marketing and technology clawbacks — that are aimed at their wallets. Even for planners under Markham, Ont.-based FundEx Investments Inc.’s umbrella, at which the payout is 100%, the flat fee rises in chunks — and the sky isn’t so rosy.

Meanwhile, senior advisors at Mississauga, Ont.-based PFSL Investments Canada Ltd. sing the praises of their compensation model. That is because they get paid very well, garnering their own commissions but also sharing in the commissions of many newcomers who hive around their offices.

Deliverance from the compensation grid, no matter from which channel the advisors come, means equity in the firm. On the brokerage side, Report Card newcomer Richardson Partners Financial Ltd. and Wellington West Capital Inc. , both based in Winnipeg, tied for first place in the Brokerage Report Card (IE, May 2006), not only on the strength of their veteran advisors but also because they offer advisors shares in the business.

“We are all owners, and it is almost like a family atmosphere here,” says one Richardson advisor in the West. “We have the same purpose and we are all on the same page.”

Toronto-based Blackmont Capital Inc. has followed this trend, subscribing to an old industry tradition that the bank-owned brokerages seem to have forgotten. Although BMO Nesbitt Burns Inc. and CIBC Wood Gundy offer stock in the parent banks as part of their compensation packages, as does RBC Dominion Securities Inc. and ScotiaMcLeod Inc. , the level of collegiality and the sense of sharing at these firms is clearly not the same as it is at the independents and boutiques.

On the financial planning side, Mississauga, Ont.-based Investment Planning Counsel and Regina-based Partners in Planning Financial Services Ltd. have had some success in keeping their top advisors happy by offering them equity. And Burlington, Ont.-based Berkshire Investment Group Inc. has plans to get in on this game as well.

Similarly, advisors who are plugging away at the regional investment dealers, such as Vancouver-based Leede Financial Markets Inc. , are content because they are sharing in the success of their companies, even though their payouts are tight. Taking the lead from the most established of these firms, Vancouver-based Odlum Brown Ltd. and Montreal-based MacDougall MacDougall & MacTier Inc. , ownership participation is somewhat of a tradition at these locally owned businesses,

There is also something about parity that advisors at the smaller shops appreciate. Proving the rule of relativity again, Leede advisors are happy with their 50% payout, as long as nobody else at the firm earns more than that. And, similar to FundEx, Calgary-based Generation Financial Corp. offers a 100% payout. But the latter firm hasn’t grown so big that its compliance costs have swollen out of control and gouged advisors’ compensation.

The insurance industry has always been a different arena. In the past, it was a pure salesperson’s paradise. Reps were compensated entirely by commissions on a grid that rose steeply for those who sold a lot of contracts for a single insurer. In fact, this was the only way possible to make decent money in the industry in the past.

Now, under managing general agents — at firms such as Equinox Financial Group Inc. and PPI Financial Group, both based in Toronto — advisors can do well by their clients and see that they invest in a wide variety of products.

Similarly, at Winnipeg-based Great-West Life Assurance Co. , which has recently introduced a weekly commission distribution, financial advisors appreciate the more even, regular compensation. With this steady flow of income, advisors feel less inclined to opt for heaped contracts, which nobody really believes are in the best interests of clients or advisors.

Yet, as distribution channels become more alike, does that mean compensation packages will fall more in line? It should. But compensation packages are the hardest of all structures to change. IE