Talk about a conundrum. At a time when equity markets were setting records, the largest banks and brokerage houses are looking for ways to cut pay for their financial advisors. An article in The Financial Times reported in May 2014 that executives at the top four firms – Merrill, Morgan Stanley, UBS and Wells Fargo – which employ about 50,000 financial advisers between them, say a wave of mergers is about to force pay down. “This is going to happen,” said one. “There are fewer places for people to go.”
The squeeze seems to affect some financial advisors disproportionately. Wouldn’t you think bringing in a quarter million dollars in annual revenue would make your firm happy? But when the paycheck arrives, it’s hard to see evidence of gratitude. For example, Financial Advisors who produce $250,000 annually at one large firm receive just 28 percent of that revenue as compensation for their efforts, compared to around 47 percent at the high end of the pay grid. This type of system effectively penalizes financial advisors at this level of production compared to colleagues who manage to produce more.
Independent Broker-Dealers like Cutter & Company, a Broker-Dealer and Registered Investment Advisor, have a better system. The Cutter & Company payout schedule is fairer and simpler when compared to many in the industry. The percentage pay out in the schedule below applies to every dollar Financial Advisors earn regardless of the product or service involved, and as you will hear in this short video, has not changed in decades.
Independent Financial Advisors typically earn higher payouts than those working for a wirehouse. But there is much more involved. When working with a firm like Cutter & Company, Financial Advisors control more of their financial destiny in other ways.
- There are no monthly milestones, or hurdles, to clear in order to receive the payout earned.
- There are no restrictions on the size of client accounts you choose to work with.
- Financial advisors have the freedom to offer more favorable rates to specific clients if they so choose – without a penalty to the Advisor’s compensation.
- More details on the Cutter and Company payout system are available at http://www.cutter-co.com/financial-advisor/payouts/payout-schedule
- Experienced independent advisors talk about additional value for clients in this video.
Contrary to the comment offered in the Financial Times article cited here, there are in fact options, or “places for people to go”. Financial Advisors who establish an independent practice receive enhanced financial value not only due to a higher payout, but also because they are building their own business, which can either be sold at a later date or with a succession plan decided upon by the Financial Advisor that created the business .
It is also a great way to do business the way you best see fit. Contact Cutter & Company today if you would like to explore the possibilities of following better financial advisor careers. You can also download a Guide to Independence by clicking here and we’ll also send you some potential expenses that sometimes are not discussed when speaking with a potential new firm: “5 Unexpected Expenses – Who Would Think You Had to Ask?”
Source: US banks aim to cut pay of financial advisers, FT.com