High-end producers have always been the kings of Wall Street, but this year some regional firms are also creating new categories and boosting their cash compensation for top end advisors.
RBC Wealth Management had a record recruiting year in 2009, bringing on 308 advisors with a combined $168 million in revenue. To accommodate some of its big producers, RBC has added three new brackets at the top end of its payout grid this year.
Previously its highest level was $1.5 million-plus. Now it goes all the way to $5 million-plus, with a 50% payout—one of the highest in the industry.
Meanwhile Memphis-based Morgan Keegan, a division of Regions Financial Corp. [RF], has created a million-dollar plus category for the first time, with a 43% payout. Previously their highest category was $750,000-plus.
Bing Waldert, a director at Boston-based Cerulli Associates, said smaller firms have added the new categories in response to their success at recruiting bigger producers over the past year.
“The regionals recognize they have these producers that they may not have had before,” he said. “Big producers saw these firms had similar services to wirehouses, with big branch offices, investment banking services and fee-based platforms, and they also let them depart from the big Wall Street firms,."
However, Rick Peterson, a Houston-based industry recruiter, sees it more as wishful thinking. “I haven’t seen many big producers going to regionals,” he said. “[Regionals] mostly go after advisors in the $350,000 to $650,000 range.”
However, Peterson added, given the negative effect that the market has had on advisor production, these producers are likely to grow to $850,00 to $900,000 when conditions improve. “The regionals are being smart because they can pay less for these advisors now and benefit when they grow…the wirehouses are still just focusing on first and second quintile producers.”
The top end producers are certainly being taken care of at Morgan Stanley Smith Barney [MS]. The firm’s new combined grid has retained Smith Barney’s higher payouts for its biggest producers. Previously Smith Barney paid million-dollar plus producers a higher rate (between 44% and 46%) than Morgan Stanley (between 43% to 44%).
The new grid retains the higher payout and boosts the payout for advisors producing over $5 million. Morgan Stanley didn’t even have a category this high, maxing out at $3 million. Smith Barney paid these top producers 46%. Under the new grid the $5 million-plus producers will receive a 47% payout.
Waldert said advisors in the $5 million category are few and far between, but they’re extremely lucrative for the firm. “This (a higher payout) is just one more thing to try and keep them at the firm,” he said.
Find out which firm will pay you the most in our upcoming March compensation issue.