Kane, the founder and managing director of KaneCarlton, a consulting firm in the wealth management industry, said he was once handed a 2-page compensation grid by a bank that he was working with. But he feels that such a streamlined report isn’t enough to fully outline a complete plan.
He showed the audience plans form several wirehouses and regionals to highlight areas he thought were well done by those companies. He especially liked the profit sharing aspect of Edward Jones.
He also noted that banks need to keep their customers in mind as just one constituency when designing their compensation plans for advisors. They should be aware of what the clients are thinking, he said. And these days, clients are looking for new ways for advisors to be compensated. He showed commercials from various companies promoting the idea that advisors aren’t paid on commission. For example, discount brokers, the fastest growing segment of the advisory industry, pay their employees a salary, which easily can be touted as a plus on a TV commercial. And RIAs, the second-fastest growing segment, are based on fee income. Even though a lot of banks are trying to shift to a fee-based model, he said the channel generally pays advisors the same way that brokers were paid 150 years ago (by commissions.)
That’s something that will take a long time to change, though, he says. The industry wants to make a shift, but for something as important as compensation, no single company –not even a big one—can just change to a salary-based system overnight.
