Despite market conditions making the lives of financial advisors more complicated by the day, answering the question of what planners will be paid in 2022 is pretty simple.
In many cases,
The reason, industry insiders say, is an environment of increased competition, increased uncertainty and plenty of options for advisors.
“People don't want to rock the boat too much on changing the grid. It's kind of like what we used to say growing up in New York. Doing that would be like going into a New York City subway and putting your hand on the third rail. You're going to get french fried pretty fast,” said recruiter and consultant Mark Elzweig. “The reason for that is, historically, most wirehouses every year starting around Thanksgiving start monkeying with the payout … which can really add a lot to their bottom line. It was kind of like a yearly game of chicken where they say, ‘We cut your payout a little, but you're not really going to leave for that reason are you?’ The reason they stopped doing that is the movement in the industry.”
Financial Planning’s annual analysis of base pay for advisors — conducted by compensation consultant Andy Tasnady and his firm,
For a breakdown of advisor pay at different production levels:
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According to Tasnady,
But the higher minimums at UBS means less for those producing at the lower end of the spectrum.
“When you look at their change, they're really saying that they want people at $500,000 and above,” Tasnady said. “It's kind of small, but they're definitely leaning more toward trying to keep their highest-producing advisors happy and trying to push some more opportunity toward them, and they are now paying the lowest amount for advisors at the $400,000 level.”
In an attempt to boost its retention and
Advisors in Wells Fargo’s Private Client Group will get 22% out of the first $13,500 they generate in monthly revenue, with a 50% rate on any other business. For enhanced compensation, advisors will qualify individually if they produce at least $2 million in trailing 12-month revenue and growth of $150,000 or more from the prior year.
For teams, each advisor must have an average of $800,000 or more in annual revenue while having an agreement on file to share 75% or more of their combined revenues.
Other changes include
Merrill brokers assigned to an account transferred from an exiting colleague will get the full 100% payout in the first year, rather than the previous 50% level. In addition, the grace period for keeping the assets in house without any penalties for losing the transferred accounts is doubling to a year from only six months.
Elzweig said plans that throw in these kinds of loyalty incentives are the result of what independence means in wealth management today. He said many advisors on the move in 2022 are top producers, and being an RIA is something that has become an aspirational goal for a lot of people.
“It's doable. It's popular. It's not mysterious. And we're not going to see wholesale slash-and-burn cuts to grids anymore just because of the fact that advisors know that going independent is a very easily executable choice,” he said. “Every advisor has friends who've gone to the other side and are quite happy. It's a routine choice right now, and it's no longer a pioneering event.”
Elzweig added that he sees the comp grid changes of today more as “behavioral modification programs.” He cites plans that make it more lucrative to be part of a team as an example and explains why firms might push such behavior.
“With teams in particular, I think that they feel the business is very complex and that a team can do a better job servicing clients than any one individual. And secondly, it's not lost on them that teams are harder to move,” Elzweig said. “There's always somebody on the team who has been there 40 years, will probably be buried with the company flag and isn't going anywhere ever. But the positive part is that with a built-in team, there's more of a built-in succession plan for the older advisors who can transfer their business to the younger advisors.”
With that approach comes opportunity for advisors who stay put as the industry changes.
Tasnady also sees the protection and nurturing of teams as the primary focus of the largest firms. And from an advisor's point of view, the “big transition” means a clear path to increase your income.
“Advisors are always retiring. It’s a mature industry, and that creates a big opportunity for the mid-career or younger advisors to basically pick up the earnings,” he said. “If you're at a place like Merrill Lynch and you’re the 45-year-old who knows the 63-year-old on your team is about to retire … you benefit from the assets and those clients now being transferred to you. So that's one of the big reasons that a lot of advisors stay at the big firms, because there's a lot of money there and there's a lot of money in transition.”
For Elzweig, it’s a matter of “what else can you do?” He said major shifts, such as the move toward fee-based business models years ago, aren’t in the forecast for the near future, creating an environment where no one is looking to fix what isn’t broken.
“The grid rates have kind of reached an equilibrium, and I don't think we're going to see any major tampering with that,” he said.
