Large wirehouse operations appear to be telling the financial advisors that ‘It’s a sprint, not a marathon’ when they set monthly production hurdles that are tied to higher compensation. And on top of that, the performance bar for achieving higher payout levels seems to be constantly getting raised. The justification for moving the goal posts is often that such practices are the ‘industry norm’.
Advisorhub.com recently reported that Morgan Stanley increased the break-points in its 2017 pay grid 10 percent and increased its minimum ticket charge by 25 percent. The same article reported Stifel Nicolaus raised its monthly pay hurdle by 20 percent for 2017. The report said for Stifel brokers, the change means they will get a flat 25 percent payout on the first $12,000 they generate each month and 50 percent on all revenue above that. For the last six years, the 50 percent payout took effect at the $10,000 revenue level.
“The firm has not changed compensation in six years, which goes against the industry norm of changing it every single year,” Stifel recruiting head John Pierce told AdvisorHub.com.
Better Alternatives to the ‘Industry Norm’
Compensation changes for financial advisors might be the ‘industry norm’, but they are not universal. Cutter & Company, an independent Broker-dealer and Registered Investment Advisor, has not changed its payout grid since the firm began operations in 1988. In addition, Cutter’s independent financial advisors receive the percentage they qualify to earn with no hurdles; the payout applies for the first dollar earned every month.
Cutter & Company has made ticket charge changes recently. But they have gone down. The reduction is more than 15 percent for equity ticket charges. Mutual fund ticket charges and fee-based platform expenses have also been reduced, in some cases by 25 percent.
Generally, independent financial advisors are more satisfied with their compensation arrangements than those who work for wirehouse operations. That sentiment is validated by a J.D. Power Survey. discussed in this article on our blog: https://www.cutterco.com/blog/get-off-the-compensation-roller-coaster
Changes that put the squeeze on financial advisor earning potential can be irritating, to say the least. If you have an interest in exploring options for your own independent practice – with a stable payout schedule at higher levels and where you take control of your business in a client-focused manner — we welcome a conversation.