The Increasing Complexity Of Wirehouse Comp Plans

With every new year comes the re-evaluation of compensation plans for wirehouses, broker-dealers, and RIAs across the financial industry. While changes to compensation grids are more or less inevitable, they don’t always leave advisors happy and satisfied with the modifications that are made to their payment plans. 

Cerulli Associates recently released their U.S. Advisor Metrics 2022: Trend in Advisor Compensation report that takes a deeper look at advisor compensation trends across the industry. According to the report, seven in ten advisors that work under broker-dealers are content with their compensation packages. But when you look at their wirehouse counterparts, 62% reported that their compensation plans were too complex. 

Wirehouses tend to change their compensation plans more consistently in comparison to broker-dealers and RIAs in order to meet corporate-level initiatives as well as increase levels of advisor productivity. These modifications to compensation plans also tend to happen more frequently, making it more difficult for advisors to navigate and stay up to date.

The report also showed that 27% of wirehouse advisors noted that they believe that cross-selling incentives are too prominent in their compensation plans, in comparison to only 11% of broker-dealer advisors. One-third of wirehouse advisors also noted the increasing pressure to cross-sell banking and lending products as a pain point.  

One of the most notable pain points highlighted in the report is that 50%of wirehouse advisors feel that their compensation plans are based on factors that are outside of their control, such as time working at the firm. That fact, coupled with more frequent and complex changes to compensation plans, has been a driving factor for making a move over the past couple of years. Cerulli reported that 45% of advisors that have switched firms in the past three years have noted the amount or structure of their compensation plans as the driving force behind the decision to move. 

While there are moves that wirehouses can make to help with advisor satisfaction when it comes to compensation plans, they likely won’t happen in the next couple of years. As these wirehouses continue to tinker with their compensation plans, it might be the push an advisor needs to start looking for a better home for their business. 

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