Financial advisors who work for wirehouse firms are sending signals to their bosses: We are not happy with what you are doing to our compensation. J.D. POWER SURVEYED a cross-section of employee advisors, 50 percent of whom indicated negative changes to their payout since 2014. Only nine percent said their compensation plans improved.
The J.D. Power survey also found employee advisors “with higher assets under management (AUM)—$150 million or more—are more negatively impacted than advisors with lower AUM—less than $50 million. Many advisors believe their compensation plans are more aligned with corporate goals (86%) than with rewarding appropriate behaviors (64%), reflecting the perception among some advisors that there is pressure to sell products and services that may not be optimal for their clients.”
Independent Advisors Report Higher Compensation Satisfaction
That same survey found an increasing percentage of those advisors are open to moving on. One place they are likely to find greater satisfaction is in the independent channel where:
• 83 percent of independent advisors said payouts stayed the same or increased
• More than 80 percent said their compensation rewarded appropriate behavior
Cutter & Company, a Registered Broker-Dealer and Investment Advisor, has a payout structure that has not changed since the firm’s inception in the mid 1980’s, other than to add incrementally higher levels. The schedule can be FOUND AT THIS LINK on the firm’s web site.
The payout schedule is designed to reward independent advisors for their own hard work; they retain the vast majority of the value for nurturing client relationships. The payout schedule is also more simple than can be found in many places; it applies to all products in the portfolio and to every dollar financial advisors sell. This business model rules out providing incentives that promote certain products over others. It truly puts the interests of clients ahead of the financial goals of the firm.
Certainty that Rewards Value
It seems increasingly clear that certainty can be nearly as important as the level of compensation for financial advisors. While wirehouse compensation levels appear prone to changes, often from one year to the next, independent brokers can expect more stability in compensation over time. The track record bears that out. Overall satisfaction levels are consistently higher for independent advisors compared to wirehouse employee advisors.
Food for thought. Contact Cutter & Company today if you would like to explore the possibilities of a more stable and rewarding future as an independent financial advisor.