This year, wirehouses did something memorable. They finally stopped monkeying with their payout grids.
What’s driving this change, or rather lack of change?
Competitive pressures.
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The firm is rewarding advisors with new rewards for growth – and cutting pay for those who don't hit certain hurdles.
November 9 -
A bonus introduced earlier this year has helped fuel client acquisition, executives say.
October 15 -
It’s the second big hiring announcement by the regional BD within the past week.
October 30
Let me explain. Normally, right around Thanksgiving each year, major wirehouses rejigger comp grids and tweak criteria for deferred compensation and award programs. It’s a yearly game of chicken as wirehouse executives wager that although advisors may bellyache and stamp their feet, not that many will actually jump ship over a minor move of the goalposts. Even if some advisors hit the bid elsewhere, by the following year the entire matter will be largely forgotten and they will have instituted a policy that is accretive to the firm’s bottom line.
Our annual analysis of starting payouts for wirehouse, regional and national brokerage firms.
This year is different. Wirehouse executives understand that any whacks to their grids could be like putting their hands on the proverbial third rail. They might get scorched big time.
Most advisors who leave wirehouses are signing on with regional and independent firms. So far this year, more than 470 advisors overseeing $66 billion in assets have exited the wirehouses to join rival firms, according to FINRA BrokerCheck records and hiring data analyzed by Financial Planning. At regional firms, payouts are higher than those of wirehouses and advisor compensation grids are rarely revised. Advisors who join regionals can be confident that payouts will remain in place for the foreseeable future. They are not subject to the same yearly payout tweaks as their wirehouse brethren. Independent advisors of course can control their expenses and typically net somewhere between 60% and 65% of gross revenues. The fact that many advisors are gravitating to venues in which payouts are more predictable and less subject to ever shifting corporate diktats has not been lost on wirehouse executives. Regionals and independents are now their primary rivals — not other wirehouses.
Let’s briefly review the wirehouse payout changes for 2019 that have been reported thus far (Wells Fargo has yet to reveal its compensation plan for next year.)
Put another way, major wirehouses are leaving their grids untouched because they know that their advisors are comparison shopping with regionals and independent firms. After years of losing some of their most productive advisors because of these annual payout tweaks, perhaps they’ve finally gotten the message that this strategy is counterproductive.
Wirehouse payouts are not likely to be reduced because the superior grids of regional and independent firms are now the benchmarks against which wirehouse advisors evaluate their own payouts.
Instead, brokers can expect the firms to assemble more carrots and sticks intended to incentivize the types of advisor behaviors of which they’d like to see more of. Executives may ask advisors for stronger asset growth or more client acquisition. But an era of perennial grid tweaking may be behind us.
