Trailing Production Prevails in Bank Advisor Pay
Financial advisors working in banks and credit unions are likely to be paid on the basis of their production over the past six or 12 months, marking a dramatic shift in how advisors are compensated, according to data from Kehrer Saltzman & Associates.
Only about one in four advisors (24%) are paid based on their production in the current month, down from 58% who were paid that way in 1997, the study found. Today almost half of advisors (48%) are compensated based on their average production over the previous six months (24%) or the previous year (24%), payout structures that were not used in 1997, according to the firms recent survey of compensation practices.
In 1997 no credit union or bank reported using a trailing average of production to compute advisor pay. This change to a rolling average has reduced some of the volatility common in compensation plans that tied payout to each individual months production, Kenneth Kehrer, a principal of Kehrer Saltzman & Associates, said in a statement.
In 2012, advisors earned average payouts on annual production that ranged from 20% to 41%. Advisors producing $120,000 in revenue had an average payout of 20%, while those producing more than $2 million had an average payout of 41%.
In 2012, advisors produced $342 million in gross dealer concessions, or revenue from the sale of securities, mutual funds, insurance and other products. Thats up from $317 million in 2011 and $300 million in 2010, but down from $352 million in both 2007 and 2008.
The survey covered 40% of all advisors working in credit unions and banks, according to Dr. Kehrer.