Sometimes the best comp plan isn’t a comp plan

For advisors wondering which firms pay the most, it’s worth asking another question entirely: Is it time to look past compensation plans?

“People ask me all the time, ‘I’m at firm XYZ, where should I work to get the most pay?’ I say, ‘go where you can make it to $2 million [in production],’” says compensation consultant Andy Tasnady.

In other words, the best comp plan may be the firm that helps an advisor grow at a faster clip.

“If you do what it takes to grow, go out and prospect and add clients, that’s how you’ll get a 20% pay boost. And if you’re getting what you need to grow — a teammate, referrals, lending, more resources, whatever it is — you can stay where you are,” Tasnady says.

Following such advice may be easier said than done. In recent years, there’s been a raft of changes to comp plans as well as the kinds of practice management resources available and how such resources are delivered.

Wirehouse brokers, for example, have seen bonus requirements upped, grid thresholds raised and the cash portion of their comp grid shifted into deferred.

For its 2019 plan, Wells Fargo changed base tiers for deferred compensation, increasing each tier’s maximum value by approximately 10%. For example, the second revenue tier was $500,000 to $700,000 under the 2018 plan. Under this year’s plan, the tier is $550,000 to $770,000. That means an advisor who generated $500,000 in 2018 may need to generate an extra $50,000 to earn the same pay.

Regional BDs’ pay plan changes have traditionally been infrequent, but some firms have made changes in recent years. In 2017, Ameriprise shifted some of the cash portion of advisor’s pay into deferred compensation, a company spokeswoman confirmed.

Practice management, training and other resources have also changed as firms revamp procedures and reevaluate growth strategies.

UBS, for example, cut some coaching staff, though executives note that advisors can seek third-party coaching and the firm is reevaluating how to deliver such resources to advisors.

Regional broker-dealer RBC redesigned its practice management program for its roughly 1,800 advisors. The company has hired five coaches and added an online assessment that sorts advisors into one of three tiers. The assessment consists of about 350 online questions, though advisors don’t have to answer all the questions.

“We help them create segments, and create service models that are repeatable,” says Nate Angelo, head of wealth management consulting at RBC.

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The rapid growth some advisors experience early in their careers too often tapers off, experts say. Put differently, an out-of-the-gate growth strategy can initially turbocharge an advisor’s growth but hamper it down the road.

“Plateauing is typically a result of too many households, too many accounts and too many investment solutions that need management,” Angelo says. “What we try to do is instead of saying you are doing too much, we try to help them arrive at that conclusion themselves.”

Tasnady says some advisors end up taking on too many clients in a bid to grow for growth’s sake. Pruning a book of business can be painful, but necessary. “You can’t really grow without focusing on larger accounts because you max out,” he says.

It’s a message that some firms have tried to get across via compensation plans in the form of minimum account sizes and bonuses incentivizing the addition of net new households with large assets. Pruning is also a feature of some practice management coaching.

It’s true for some advisors who go through RBC’s program, Angelo says.

“In the first six months, revenue may take a dip because they are moving households to RBC Advantage, moving households to another advisor in their office,” Angelo says. It comes down to a realization that the advisor cannot provide the service level that he or she wants to all their clients, he adds.

After trimming client lists, advisors typically experience renewed growth and reinvigorated relationships.

“It’s about writing down, what is the service model for the AAA client, for an AA client, for a single A client? Then we have to become dogmatic about applying that service model,” Angelo says.

Christine Gaze, president of Purpose Consulting Group, says some advisors address capacity constraints by bringing on new team members.

“The average advisor can only manage between, say, 50 and 125 clients, depending on how their practice is structured,” Gaze says.

But if adding teammates is not done in a structured manner, the group can become unwieldy and inefficiencies can persist.

“The mindset to grow a business initially is one thing. The mindset to develop a team that is flourishing and capable of high performance is different,” she says.

Firms have moved to address this. Merrill Lynch’s most popular training program for experienced advisors, entitled Advisor as CEO, is geared toward teaching efficient team management.

Brokerages, meanwhile, are reevaluating how they deliver coaching and other practice management resources.

Edward Jones has tailored training to better accommodate advisors’ learning styles. Video tutorials, for instance, are particularly popular. “Many of us, regardless of age, are visual learners,” says Alan Kindsvater, principal of branch team performance.

The firm now has “huge libraries” of videos, he adds. “Equally important: We continually take things out. We monitor feedback and hits on those things.”

The St. Louis-based firm delivers training sessions in its home and regional offices. And Edward Jones tells its advisors to focus first and foremost on client goals.

“Advisors have to understand their value is not in portfolio management. You have to have that skill, no doubt. But your value is in understanding your client and what success means to them,” Kindsvater says.

It’s a point that clients have made loud and clear. Research firm Cerulli Associates found in a recent survey that a majority of clients rated transparency (73%), understanding of needs and goals (67%), and promptness of requested follow-ups (66%) as extremely important factors when choosing a financial advisor.

At Janney Montgomery Scott, the firm’s more than 800 advisors have made clear they prefer face-to-face instruction, according to Caitlin Ulmer-Long, director of business productivity. The Philadelphia-based broker-dealer has upped its practice management coaching staff to five from two a year ago, and it’s hiring a sixth team member. The firm has organized a series of half-day workshops focused on growth tips at its more than 100 branches.

“We give the advisors specific metrics that we have created ahead of time. At the event, we focus on more high level. And then after the fact, we go into more detail,” Ulmer-Long says.

The sessions feature tips from top advisors since brokers like hearing from other practitioners, Ulmer-Long says. Additionally, her team is focused on working with advisors’ support staff and looking for incremental changes that can have positive effective.

“We are not asking advisors to change their entire practice, to spend say 30 hours a week thinking about this,” she says. “We’re saying, ‘What are the two or three things that you can slightly change to have a positive experience in the future?’”

But while each advisor might need a unique solution for their growth problems, Ulmer-Long’s team finds that there’s a baseline shared across the group.

“What we know works best is sitting down and meeting with advisors,” she says.

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Compensation Practice management Regional BDs Wirehouses Edward Jones RBC Wealth Management Janney
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