When markets go up, even advisors whose compensation rates have dipped have fewer reasons for complaining. They can at least take comfort in knowing their growing assets under management will boost their higher take-home pay.
Such was the case in recent years,
That's the possibility that advisors
Changes at UBS and Janney
This year, UBS and Janney Montgomery Scott followed the examples set by
Advisors generating $400,000 in annual revenue at UBS will see
"This plan aligns advisor compensation with our strategic growth and profitability goals in the U.S., with our belief that advisors should be rewarded for growth and longevity and with our commitment to offering one of the industry's most competitive packages," UBS said in a statement.
Follow these links for breakdowns for 2025 advisor base pay* at four different production levels:
Best advisor pay for the $400K producer - Best advisor pay for the $600K producer (April 22)
- Best advisor pay for the $1M producer (April 23)
- Best advisor pay for the $2M producer (April 24)
*All data is provided by the companies featured and compiled by Arizent, with analysis by Tasnady & Associates. Data from Edward Jones reflects average values, and individual financial advisors' experience there may vary.
Janney instituted its changes by simplifying its compensation grid — the in-house rubric showing payout rates for advisors at different levels of revenue production. The number of tiers in Janney's grid fell to 10 this year from 12.
READ MORE:
A Janney spokesperson said the firm's
"Our recent grid updates reflect a streamlined tier structure while ensuring total compensation remains competitive," the spokesperson said. "Over the last year, we also introduced an ownership program, giving every Janney advisor and employee an ownership stake in the firm."
Below the $400,000 revenue level, both Wells Fargo and Morgan Stanley are also making life more challenging for advisors in a revenue-generation tier often referred to as the "penalty box."
Firms put targets on low-end producers
If stock values fall or offer only tepid returns, the resulting pain will fall on advisors at all revenue-production levels. Since advisor compensation consists in large part of fees set at a percentage of assets under management, it tends to increase or decrease in direct proportion to the value of stocks and other assets in clients' portfolios. If the market tanks, the result would be a double whammy for low producers, many of whom have already seen their payout rates reduced in recent years, Tasnady said.
READ MORE:
While UBS and Janney adjusted payouts for certain advisors this year, most of their rivals
"It's easier, I think, to make compensation changes when advisors are making 20% more cash already," Tasnady said.
The lessons of 2008 for advisor recruiting
Waxelbaum said falling take-home pay, if the current downturn persists, could lead to an increase in advisors switching firms. That's what eventually happened amid the bear market tied to the collapse of U.S. housing values in 2008.
READ MORE:
Advisors were at first reluctant to try to move their books of business, fearing clients might see little reason to follow someone managing a declining portfolio. But that changed over the next two years as the economic outlook improved and recruiting "accelerated to what was the highest pace of a six-month period ever experienced on Wall Street," Waxelbaum said.
"For right now, my attitude is that most advisors are going to be reluctant to take any action until this volatility fades," Waxelbaum said. "But then they're going to play catch up."
Waxelbaum said changes in market conditions often take 60 to 90 days to show up in advisors' take home pay.
"And when that impact starts to get felt, do I think that if there are advisors who've gotten their ass kicked, who are going to be impatient and not want to wait it out?" he said. "Yes."
"So you are working harder and you are getting paid less because the markets are down," he said.
Nash agreed that declining compensation spurred advisor movement following the housing crash nearly 17 years ago.
"When you're cutting payout rates and the markets fall, that's a double hit against advisor take-home pay," Nash said. "After 2008, that spurred a lot of
Join teams, produce more revenue or leave
Of course, making low-end producers work harder to take home the same amount is perfectly in line with many wealth managers' long-standing goals, Tasnady said. In the case of UBS, for instance, the message to advisors is clear, he said.
"It's basically telling those advisors that they need to either get on a team where they can earn more through their team-based compensation plan, or leave the firm, or just accept a much lower payout," Tasnady said.
UBS executives have acknowledged the pay changes could lead some advisors to the exit doors. In an earnings
But UBS is also quick to point out that it has tried to give advisors additional means of making up for revenue they may lose because of changes to compensation policies. The bank, for instance, is offering a cash award of up to $1 million for advisors who hit certain targets for bringing in net new money.
UBS has also delayed a proposal that would end advisors' ability to collect part of the so-called 12b-1 fees investors pay when they have mutual funds in their portfolios. Those fees, which cover marketing and distribution costs, were initially supposed to stop going to advisors at the beginning of the year; the deadline has now been pushed back to July 1.
Policies like these are often tacked on to base compensation in order to encourage certain actions. One way advisors with low revenue numbers can boost their pay is by joining teams with higher-producing colleagues.
UBS had once had the most generous compensation policy on Wall Street for teamed-up advisors. Under a now-scrapped policy, it used the total revenue generation for the entire group as the basis for payments.
The firm's recent compensation changes mean advisory teams will now be paid at the rate earned by their highest-producing member. That modification brings UBS's pay policy for teams in line with almost every other firm; it also is likely to mean pay reductions for some advisors.
Roughly 70% of UBS advisors now belong to teams. Having advisors group up with their colleagues not only helps them by often enabling them to get paid at the rate of higher producers; it also helps the firm by making it harder for single advisors to break off and move assets to a competitor.
When considering the different components of advisor compensation, Tasnady likes to use the analogy of a house.
"Changing the grid is like changing the shape of the house," he said. "Adding a room, knocking down a wall — these are things that are at the core. And then, a lot of times, these other bonuses and tweaks are more like repainting the room, moving the furniture around."
Tasnady said firms know that advisors like to see few changes in their compensation from year to year. Many firms shy away from annual grid modifications to
"That's the advantage of not making a change," Tasnady said. "The disadvantage is you're missing an opportunity to send a new message on the types of behaviors you want and to create new excitement if there is some opportunity for increased compensation."
Giving advisors a push up the revenue-generation ladder
Firms clearly want to instill enthusiasm for the prospect of having ever greater amounts of assets under management. Most point advisors toward the higher end of the revenue scale with much higher payout rates.
UBS, for instance, lets advisors at the $1 million level keep 49% of the revenue they produce — the highest proportion among its direct wirehouse rivals. At the $2 million level, it's bested by Wells Fargo, which lets its advisors keep 51.7% compared with 51% at UBS.
At the low end, though, UBS advisors with $400,000 in annual revenue keep only 29%. Merrill pays out 40.5% at that level, and Wells Fargo 38.7%
Janney, meanwhile, has changed its grid in ways that will bring it more in line with other regional firms' pay policies for high producers. Advisors generating $1 million a year in revenue will now get to take home 50%, up from 48.5% last year. Its new rate for $1 million producers put it slightly behind its regional rivals Raymond James, RBC Wealth Management and Stifel, which all pay just over 50%.
Falling markets help control firms' costs, but …
Tasnady said that wealth managers for years have worried about what's known in the industry as
"If the market continues to decline from where it is today, you'll see less revenue-related expense, particularly in Wealth and Investment Management,"
At UBS, executives have also been working to control expenses as it seeks to bring its cost-to-revenue ratio down to 85% by the end of 2026. That ratio was at just over 92% at the end of last year.
The trouble is that firms that have lower advisor-compensation costs owing to falling markets will also have lower revenues. And the pain from diminished take-home pay won't be felt solely by low-end producers, Tasnady said. It will hit the highfliers that firms are desperate to keep as well as the advisors whom firms might as soon see go somewhere else.
"If the market, for the first time in a while, dips 15% or 20%, that means their compensation is going down 15 or 20%, because it's completely tied to the amount of fee revenue," Tasnady said. "So it's a tough environment to be cutting compensation rates in. Maybe it was a good thing that, particularly this year, firms didn't make a lot of changes."
