Ideas and Insights for Wealth Managers
www.onwallstreet.com
Go
Teams!
The 2012 Compensation Ranking
reveals the best payout plans and
the emergence of team-based awards
The Rich Rush
to REITs p.13
A New Bull
Market? p.26
The Financial
Calculus of
Aging p.56
Darryl Metzger
of Hilliard Lyons
Volume 22, No. 3 • March 2012
COMPENSATION 2012
Go,Teams!
Our annual compensation ranking examines team
remuneration along with the best payout plans
W
hen Hilliard Lyons introduced its current team-based award
program in its compensation program five years ago, it led
to what Executive Vice President Darryl Metzger now calls
an “A-HA” moment for the firm.
That’s because in four years, the share of the firm’s financial consultant force working on teams has surged from 30% to its current total
at 70%, and could continue to grow, Metzger says.
Hilliard’s team-based award is just one part of its compensation plan,
which also rewards members of the firm’s financial consultant force
who practice individually. But the strength and growth of its team
program speaks to an industry-wide emphasis on teams that has continued to surface on the compensation plans for wealth management
firms this year. On Wall Street magazine has once again gathered the
new compensation plans for the large wirehouse and regional firms
to see what financial advisors can expect from those companies in
2012. And, for the first time, we have also included a new chart from
a smaller regional firm, Southwest Securities.
The results may surprise you. With the help of our outside compensation
expert Andy Tasnady, we found out which firms came out on top at the
$1 million, $600,000, $400,000 and $200,000 production levels.
Of the wirehouse firms, UBS Financial Services held on to the top spot
at the $1 million mark, and rose to number one this year at the $600,000
level. Bank of America Merrill Lynch took the top spot at the $400,000
level, while Wells Fargo came in at number one at $200,000.
Of the regional firms, Raymond James & Associates also held
on to its top spot at the $1 million mark. Janney Montgomery Scott
took number one at the $600,000 level. Stifel Nicolaus and Wedbush
Securities held on to their top spots from last year at $400,000 and
$200,000 respectively.
But the compensation story this year is so much more than the
rankings or the team-based awards. It’s also the tweaks that firms
make to try to get their financial advisors to reach higher and higher
for assets. It’s the acquisition of Morgan Keegan that will make the
appearance of that firm’s compensation grid in our rankings this year
its last. And it’s all of those changes that will help determine financial
advisor loyalty.
It Takes a Team
Hilliard Lyons’ team-based plan, called Preferred Partnership, was
inspired five years ago when the firm looked at what smaller, more nimble
wealth management firms were offering, according to Metzger, who also
serves as director of private client group administration at the firm.
Today, Louisville, Ky.-based Hilliard’s team plan allows for the teams
to combine the production from all of their partners and tell the firm
each year how they want to divide it.
“Basically, it allows them to go through our financial consultant
compensation plan as one unit. Even though there might be four or
five people on that, they can make more money,” Metzger says. “They
can make more money being in the preferred partners versus a standalone advisor.”
Hilliard’s teams can range in size from two financial consultants
working with one client ser vice associate to seven financial consultants
working with three client ser vice associates. The bigger team would
likely be in a growing area for the firm like the Carolinas, Metzger says.
Hilliard currently operates predominantly out of Kentucky, Indiana,
Ohio and Tennessee.
The team structure allows them to provide different areas of expertise for clients, much like seeking the consultation of a general health
practitioner and specialist doctors, Metzger says. This structure
Hilliard Lyons executives Jaleigh White, left, director of high net worth strategies,
and Darryl Metzger, director of private client group administration
ultimately allows for a financial consultant who enjoyed daily portfolio
analysis and analytical details to pair up with another financial consultant who leans more toward broad wealth planning and relationship
management.
“It’s people with different skill sets and different things that they
enjoy most about the practice partnering with other team members
that leads to greater client satisfaction and really greater advisor satisfaction, as well as overall success for the firm,” says Jaleigh White,
who joined Hilliard as executive vice president and director of high
net worth strategies last July. “It’s the case where one plus one does
equal three.”
The team structure is also aimed at taking the risk off of adding new
members. Someone with a very unique set of expertise, but not a lot of
clients, can be folded into a team in their first year at one production
level. In subsequent years, after they have proven themselves, their
take-home pay can go up.
But even as Hilliard has ramped up its emphasis on a team-based
approach, sometimes an individual practice still makes the most sense,
Metzger says. One of Hilliard’s individual financial consultants is a
municipal bond expert with 35 years of experience in the industry.
His practice, as a result, is more of a niche and more suited to an
individual, according to Metzger. “We absolutely value the individual
practitioners, financial consultants, but a lot of those individuals have
a very niche and narrow practice,” Metzger says.
Financial advisors, Hilliard’s Jaleigh White says, “are finding value
in partnering and developing teams, where different people have different areas of specialty.” She adds that the firm’s management has
been hearing from its advisor force that the additional “complexity to
the services and the comprehensive nature of what we’re providing
to clients” requires a variety of wealth management skills. “It takes
people with a lot of different points of view, specializations,” she says.
And, she notes, “as advisors mature in their careers, they’ll find that
there’s certain parts of the practice that they really gravitate to and
want to spend more of their time with.”
That message is getting through to the firms loud and clear and
increasingly, it is being reflected in their evolving compensation
structures. ows
2012 Best basic pay if
you’re producing …
(Analysis represents starting points for payouts)
A number of special policies are not included here since they do not affect 100%
of the population evenly and therefore are more haphazard to compare. Individual
results can vary dramatically, based on the mix of business and policies at each
firm. For example, pay can rise from special bonuses and fall from penalties such
as discount sharing, small client limits and ticket charges.
Best pay if you’re producing....
$400,000
Company
TOTAL
Cash
Grid
Earnings
Year-End
and
Deferred
Awards
Cash +
Year-end &
Deferred
Wirehouses
$1 Million
Company
Cash
Grid
Earnings
Year-End
and
Deferred
Awards
TOTAL
Cash +
Year-end &
Deferred
Wirehouses
$437,500
$87,500
$525,000
Morgan Stanley Smith Barney
440,000
60,000
500,000
Merrill Lynch
430,000
65,000
495,000
Wells Fargo
463,040
7,500
470,540
$462,500
$67,500
$530,000
Janney Montgomery Scott
Morgan Keegan
Hilliard Lyons
460,000
430,000
467,750
60,000
85,000
45,000
520,000
515,000
512,750
RBC Wealth Management
Stifel Nicolaus
Wedbush
460,000
470,000
500,000
52,500
40,000
10,000
512,500
510,000
510,000
Ameriprise
460,000
45,000
505,000
Avg. Office
Profit*
Cash + Avg.
Profit
$140,600
$534,350
UBS Financial Services
Regionals
Raymond James & Associates
$12,000
$172,000
164,000
6,000
170,000
UBS Financial Services
159,000
4,500
163,500
Wells Fargo
163,040
0
163,040
Regionals
Stifel Nicolaus
$170,000
$16,000
$186,000
Wedbush
Morgan Keegan
180,000
164,000
4,000
16,000
184,000
180,000
RBC Wealth Management
168,000
11,000
179,000
Janney Montgomery Scott
176,000
167,750
0
8,000
176,000
175,750
160,000
14,000
174,000
173,500
0
173,500
Avg. Office
Profit*
Cash + Avg.
Profit
$17,280
$174,780
Hilliard Lyons
Ameriprise
Raymond James & Associates
Cash
Edward Jones*
Cash
Edward Jones*
$160,000
Morgan Stanley Smith Barney
Merrill Lynch
Best pay if you’re producing....
$393,750
$157,500
* Average data provided by Edward Jones, individual FA experience may vary
Best pay if you’re producing....
$200,000
* Average data provided by Edward Jones, individual FA experience may vary
Company
TOTAL
Cash Grid
Earnings
Year-End
and
Deferred
Awards
Cash +
Year-end &
Deferred
Wirehouses
$63,040
0
$63,040
Merrill Lynch
UBS Financial Services
50,000
40,000
0
250
50,000
40,250
Morgan Stanley Smith Barney
40,000
0
40,000
Wells Fargo
Best pay if you’re producing....
$600,000
Company
Regionals
Wedbush
TOTAL
Cash
Grid
Earnings
Year-End
and
Deferred
Awards
Cash +
Year-end &
Deferred
Wirehouses
$250,500
$27,750
$278,250
Merrill Lynch
Morgan Stanley Smith Barney
246,000
252,000
30,000
24,000
276,000
276,000
Wells Fargo
263,040
1,500
264,540
UBS Financial Services
Regionals
Janney Montgomery Scott
0
$82,500
70,000
67,750
66,000
56,000
50,000
50,000
0
0
0
0
0
0
70,000
67,750
66,000
56,000
50,000
50,000
Janney Montgomery Scott
40,000
Cash
Edward Jones*
$78,750
0
40,000
Avg. Office
Profit*
Cash + Avg.
Profit
$240
$78,990
* Average data provided by Edward Jones, individual FA experience may vary
$267,000
$30,000
$297,000
Morgan Keegan
Stifel Nicolaus
Raymond James & Associates
Wedbush
RBC Wealth Management
Hilliard Lyons
252,000
270,000
266,250
286,500
264,000
267,750
45,000
24,000
27,000
6,000
27,000
12,000
297,000
294,000
293,250
292,500
291,000
279,750
Ameriprise
252,000
27,000
279,000
Avg. Office
Profit*
Cash + Avg.
Profit
$59,100
$295,350
Cash
Edward Jones*
$82,500
Stifel Nicolaus
Hilliard Lyons
Ameriprise
Raymond James & Associates
RBC Wealth Management
Morgan Keegan
$236,250
Assumptions for Basic Pay (prior to special policies/contingent bonuses)
• 25% in individual stocks; 25% in individual bonds; 25% in mutual funds; 25%
in fee-based (wrap accounts, managed
accounts, etc.)
• Year-end bonuses are shown in deferred totals.
• Length of service is assumed to be 10
years.
* Average data provided by Edward Jones, individual FA experience may vary
Data compiled by Andy Tasnady, president of Tasnady & Associates LLC, a consulting firm. Chart data was supplied by listed companies.
• Assumes no growth bonuses, no asset-based bonuses, nor other behaviorbased awards.
• Also excludes 401(k) matches or profit-sharing contributions unless otherwise noted.
• Does not include: T&E expense allowance, discount sharing or ticket charge
expense assumptions, small household
or small ticket policy assumptions, or
value of any options awards.
Hilliard Lyons
Monthly incentive compensation is determined by a calculation of various
credits and debits. The net of all credits and debits for the months results
in the advisor’s total incentive compensation. Credits include the monthly
revenue grid credit percentage and finder’s fees. Debits include trade ticket
allocation, errors and other charges, and staff support allocation.
Credits
Gross Monthly Revenue Production Credit Grid
Revenue
Gross Credit
First $10,750
25%
Over $10,750
50%
FAs in a preferred partnership are on a similar grid as above based on on
the number of members in the partnership with a 17.21% ($1,850) per
partner discount. Therefore, gross credit on the first $8,900 of monthly
production per preferred partner is 25%.Each partner must receive at least
$2,000 from the partnership each month. To qualify, eligible partnerships
should have an average revenue production of $400,000 and $40 million in
assets per participant for the fiscal year immediately preceding the year in
which the partnership is proposed.
Example
Preferred
Partnership
Revenue
Gross
Credit
Revenue
Gross
Credit
2 Partners
First $17,800
25%
Over $17,800
50%
3 Partners
First $26,700
25%
Over $26,700
50%
4 Partners
First $35,600
25%
Over $35,600
50%
Annual Incentive Production Bonus
Production Range
Gross Credit
$400,000 to $699,999
2%
$700,000 to $999,999
3%
$1,000,000 to $1,999,999
$2,000,000 and above
4.50%
5%
More information about Hilliard Lyons is available by visiting our website,
www.hilliard.com, or by contacting Manager of Financial Consultant
Recruitment Ingrid Adams at (800) 444-1854 x1240 or [email protected].
All conversations will be handled discreetly and confidentially.
©2012 SourceMedia, Inc. and On Wall Street. All rights reserved. SourceMedia, One State Street Plaza, New York, N.Y. 10004 (800) 367-3989