How Comp and Incentive Changes at the Wirehouses Are Affecting Advisors and the Clients They Serve

How Comp and Incentive Changes at the Wirehouses Are Affecting Advisors and the Clients They Serve

Advisors at the “Big 3” are feeling stuck between the corporate bottom line and a battle for control

During the past few months, wirehouse advisors may feel as though they’re caught between a rock and a hard place. That is, they are being forced to choose between maintaining their income level or best serving their clients’ interests.

Corporate profit seems to be driving the bus, and each day it is increasing the distance between the advisors and the firm that they call home.

Consider some of the recent moves by the firms:

  • UBS unveiled a comp change in June of 2017 in which the firm cut back the number of bonuses their advisors could earn as a way of having them focus more on asset growth.
  • Or the grid change announced in November by Merrill Lynch that added both penalties and rewards to spur asset growth.
  • And Morgan Stanley’s message to advisors in December of last year that it will raise grid thresholds it uses to pay brokers by about 10% to incentivize them to produce more revenue.

Certainly, there are many advisors who benefit from these changes, especially the most productive folks who are asset-gathering machines.

Yet even the best and most compliant advisors complain that there is something incongruent about being told how to run their businesses and which clients to take on. As one team put it, “The notion that the new comp plan requires us to behave in a certain way if we want to continue to be paid at the same grid rate borders on offensive.”

Quantity vs Quality?

Advisors are living through a culture shift; one where firms are leading them down paths that may not be in the best interest of their clients or careers—and definitely in direct conflict with the fiduciary standard they promised to uphold. For example:

  • A Merrill advisor who must make at least 2 client referrals to other parts of the bank to avoid a pay cut.
  • A Morgan Stanley advisor who will see his pay reduced by 3 percentage points for business done with clients residing outside the United States.
  • A UBS advisor who will lose a bonus this year because he brought in many new clients but their net worth was below the threshold.

Related: What Drives a Wirehouse Advisor to Make the Leap to Independence?

So as firms battle to retain control in an attempt to maximize profit by valuing quantity over quality, advisors are voting with their feet in search of a place where freedom and flexibility are part of the culture and vision of the organization. Which is why regional firms like Raymond James, RBC and Stifel, boutiques like JP Morgan Securities, and the independent space in general, are killing it in the race for top advisor talent.

While it often feels like being caught between a rock and a hard place, the good news is that no advisor is truly stuck there. We’re lucky to be living during a time where vast changes have opened the doors to more and more opportunities that allow advisors to serve their clients and careers in a way that is more congruent with their own values. The key is to stay true to your goals and vision—and the money and happiness will follow.

Mindy Diamond
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President and CEO. Consultant. Recruiter. Thought leader. Coach. Trainer. Champion for personal growth and a life of congruence… These words describe a woman with ... Click for full bio

Most Read IRIS Articles of the Week: Feb 19-23

Most Read IRIS Articles of the Week: Feb 19-23

Here’s a look at the Top 11 Most Viewed Articles of the Week on, Feb 19-23, 2018

Click the headline to read the full article.  Enjoy!

1. Don’t Get Pinged by the Social Security Earnings Limit

I’d like to introduce you to Peggy. Born in 1956, Peggy will be 62 in 2018. She has worked in retail her whole life, the past twenty-five years spent in management. Peggy divorced from her husband 14 years ago, is still single and has no children. — Dana Anspach

2. We're Back to “Bad News is Good News” and “Good News is Great News”

This week the markets shrugged off last week’s fears and went back to the slow and steady melt up, despite economic news that looked likely to once again rock the boat. — Lenore Elle Hawkins

3. Q1 2018 Factor Views

Themes established in 2017 across a wide range of markets and factors continued to resonate through the fourth quarter. Economic growth was strong and supportive of equity markets across the globe, a range of volatility measures reached all-time lows, and business and consumer sentiment remained elevated. — Yazann Romahi and Garrett Norman

4. A Beneficial Basket of Commodities

Advisors and investors that feel they are hearing more and more about commodities and the corresponding exchange traded products in recent months are right. That is a natural result of dollar weakness and yes, the greenback is floundering again in 2018. — Tom Lydon

5. 3 Trends Shaping the Future of Asset Management

As the industry works to cope with new regulation, wades through an outpouring of new products, learns to satisfy investors’ shifting priorities and manages the active-passive debate, the viability of business units will be questioned, and at times radical measures will be taken. Peter Hopkins

6. 5 Ways Advisors Leave Money on the Table, and What to Do About It

My hope is that this article points out some opportunities for you to make more money and serve your clients at a higher level and that you decide to do something about it. — Bill Bachrach

7. The Market Has Gone Wild! Is It Time to Change Your Investment Strategy?

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind ... — Lauren Klein

8. How to Deepen Client Relations and Capture New Business Using Engaging Content

Why financial advisors NEED to understand much more clearly the power of good digital market. With tools like AdvisorStream, it’s easier than ever to get the content you need to drive leads and referrals today! — Kirk Lowe and Matt Halloran

9. Three Ways The Most Successful Gain Big Attention

How do some firms and ideas go from nowhere to everywhere in a few short months? All of a sudden a restaurant becomes popular, a gas station gains a cult following, or a Broadway show becomes too popular to get a ticket for years. — Maribeth Kuzmeski

10. Who Are the Hottest FinTech Firms and Influencers Around the World?

"Worldwide, $27.4 billion poured into fintech startups in 2017, Accenture reports, up 18% from 2016. With so much in play, it’s not surprising that 22 companies are new on this, the third edition of our list."  — Chris Skinner

11. The New Stock Market Normal Is Not What You Think!

Many sensational headlines have been written the past few weeks about market declines, but two things have increased for sure: the viewership and the ad revenues of financial media organizations — Preston McSwain​​​​​​​

Douglas Heikkinen
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IRIS Co-Founder and Producer of Perspective—a personal look at the industry, and notables who share what they’ve learned, regretted, won, lost and what continues ... Click for full bio