Title: Are We Paying Our Financial Advisors Enough? Speaker: Peter Bielan. Time: Thursday, March 6, 11:30. Location: Ballroom 1

Transcription

1 Title: Are We Paying Our Financial Advisors Enough? Speaker: Peter Bielan Time: Thursday, March 6, 11:30 Location: Ballroom 1 1

2 How Did We Get Here? Advisors are the key driver of our business How we pay and reward them really matters How many of them we have really matters too We view this as the definitive compensation reference Use these studies as an essential decision making tool We ll review two of our compensation studies today 2

3 Financial Advisor Compensation Plan Analysis 3

4 Background on Financial Advisor Compensation Study 48 participating firms, up from individual plans, encompassing four Advisor roles Actual plan data, not averages Information grouped by plan type & number of Advisors Credit Unions participated this year Visual comparative grid and narrative analysis 4

5 2013 Advisor Compensation Study Percent of Firms Offering Different Base Compensation Recoverable or no draw, 16% Forgivable Draw, 44% Salary, 40% Source: 2013 Kehrer Saltzman & Associates Advisor Compensation Plan Study 5

6 2013 Advisor Compensation Study Median Effective Payout 46% 44% 42% 40% 38% 36% 34% 32% 30% 28% Annual Plan Monthly Plan Source: 2013 Kehrer Saltzman & Associates Advisor Compensation Plan Study Annualized Production 6

7 2013 Advisor Compensation Study Plan Calculation Term 1997 Study 2013 Study 50% 38% 32% 31% 30% 19% 0% 0% Monthly 6 or 12 Month Rolling YTD Progressive Other Source: 2013 Kehrer Saltzman & Associates Advisor Compensation Plan Study 7

8 2013 Advisor Compensation Study Special Plan Enhancements Fee Based 65% Other Business Objectives 55% Insurance 36% Discretionary/Goal 31% Wealth 18% Deposits/Loans 12% Source: 2013 Kehrer Saltzman & Associates Advisor Compensation Plan Study 8

9 2013 Advisor Compensation Study Fee Based Enhanced Payments Fixed amount bonus for achieving new asset thresholds Separate fee based payout grids in the 40% - 50% range Additions to the payout grid from 5% to 8% Component in discretionary goals An advance of the first year s fee to the payout grid An increase to the first year s fee, with 1 ½ to 2 times the fees applied to the payout grid Insurance Enhanced Payments Same as in fee based, plus Additions to the payout grid up to 10% Special bonuses of 10% of premiums Source: 2013 Kehrer Saltzman & Associates Advisor Compensation Plan Study 9

10 Recruiting Packages for Financial Advisors in Banks and Credit Unions 10

11 Progressive Recruiting Packages: Origin In discussions from our Financial Advisor Compensation Study last year, firms asked us to expand our compensation work to help the industry better understand the prevalent recruiting incentives. Through interviews over the course of the year with over 30 firms, we were able to consolidate and analyze the most competitive plans to leverage the industry s collective knowledge to recruit more successfully. 11

12 Background on Recruiting Incentive Study Interviewed 30 leading firms Benchmarked the standard industry 40/40 package Found 11 progressive firms that are leading change Analysis details how and why these packages work Recruiting is about money and approach Intent is to leverage recruiting through shared knowledge 12

13 Progressive Recruiting Packages: Current Situation Many lower producing Advisors have been weeded out in a cost reduction effort. Much of the revenue growth over the past couple of years has come from productivity gains. The optimum consumer deposits per Advisor ratio is $150 million. We are currently at $300 million per Advisor. Many of the recruiting incentives in use today aren t effective. Firm management and Advisors confirm this. Do firms really want an Advisor that accepts a first year transition package of $36,000 base salary and 38% payout? The earlier an Advisor is hired in the year, the greater the financial impact they can make. The study details the structure, financial metrics and common characteristics of 11 packages that are working. We ll sample three of them today. 13

14 Sample 1: Very High Salary Earnings and Payout Effective Payout Payout Compared to Prior Year Total First Year Earnings 250% 200% $300, % $380, % $410,000 $360,000 $310, % 100% 50% $220, % 138% 75% 63% $260,000 $210,000 $160,000 $110,000 $60,000 0% $200,000 $400,000 $600,000 Annual Production $10,000 14

15 Sample 1: Very High Salary Firm Breakeven After Overhead at 25% $220,000 $150,000 Gross Margin After Overhead $300,000 $260,000 $300,000 $225,000 Advisor Compensation $450,000 $375,000 $380,000 $340,000 $200,000 $300,000 $400,000 $500,000 $600,000 First Year Production 15

16 Sample 2: Base Salary Reducing Quarterly Earnings and Payout Effective Payout Payout Compared to Prior Year Total First Year Earnings 300% 250% 200% 150% 100% 50% 0% 113% $225, % $325, % 81% 71% $425,000 $200,000 $400,000 $600,000 Annual Production 266% $460,000 $410,000 $360,000 $310,000 $260,000 $210,000 $160,000 $110,000 $60,000 $10,000 16

17 Sample 2: Base Salary Reducing Quarterly Firm Breakeven After Overhead at 25% $225,000 Gross Margin After Overhead Advisor Compensation $375,000 $325,000 $375,000 $275,000 $300,000 $225,000 $450,000 $425,000 $150,000 $200,000 $300,000 $400,000 $500,000 $600,000 First Year Production 17

18 Sample 3: High Base Salary to Drive Advisory Business Earnings and Payout Effective Payout Payout Compared to Prior Year Total First Year Earnings 250% 200% 150% 100% 50% 95% $190, % $260, % 65% 55% $330, % $360,000 $310,000 $260,000 $210,000 $160,000 $110,000 $60,000 0% $200,000 $400,000 $600,000 Annual Production $10,000 18

19 Sample 3: High Base Salary to Drive Advisory Business Firm Breakeven After Overhead at 25% Gross Margin After Overhead Advisor Compensation $450,000 $375,000 $190,000 $150,000 $225,000 $225,000 $300,000 $260,000 $295,000 $330,000 $200,000 $300,000 $400,000 $500,000 $600,000 First Year Production 19

20 Get The Full Studies At: Advisor Compensation Plan Analysis Pricing based on Number of Advisors < 25 Advisors ($250.00) Advisors ($750.00) > 100 Advisors ($1,500.00) NonBanks ($1,500.00) Recruiting Packages for Financial Advisors in Banks and Credit Unions Study Pricing based on Number of Advisors < 25 Advisors ($250.00) Advisors ($750.00) > 100 Advisors ($1,500.00) NonBanks ($1,500.00) 20

21 Thank you! Kehrer Saltzman & Associates, LLC ( KSA ) is a strategic management consulting firm that provides the financial advice industry with insights based on a melding of thoughtful institutional and consumer research, and deep experience in managing the delivery of investment, insurance, and wealth management services. We work with banks, credit unions, broker-dealers, insurance companies and related financial services companies to provide services including market research, product and business development, consulting and industry discussion groups. Please visit us at or info@kehrersaltzman.com for more information. This information is the protected intellectual property of KSA and may not be copied, distributed or transmitted without prior written authorization. Any unauthorized attempt by any person or entity to copy, distribute or transmit this information without prior written consent will subject such person or entity to legal enforcement action. The information presented herein is not intended to provide tax, legal, accounting, financial, or professional advice. KSA shall not have any liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained in this document. Contact Peter Bielan peter.bielan@kehrersaltzman.com (770) Kehrer Saltzman & Associates, LLC 9218 Skipaway Drive Waxhaw, NC