Advisors plying their trade at Canada’s deposit-taking institutions say their compensation has been hammered by the recession. And they are not pleased that their firms aren’t lowering their bonus targets to adjust for the recent turmoil.
It’s no surprise, then, that performance scores for total compensation in this year’s Report Card on Banks and Credit Unions have also taken a hit, as the overall average rating for the category dropped to 7.6 from 7.9 in 2008.
“The market downturn has affected how we are compensated,” says an advisor in Ontario with Toronto-based Canadian Imperial Bank of Commerce. “The structure is that clients should stay in mutual funds, although it’s in their best interest to sell.”
Adds another CIBC advisor in Ontario: “[The compensation] is set up in such a way that you can’t get real money above your base salary in the current environment.”
The data give this latter statement much weight. Of the 246 advisors surveyed, 77.8% reported earning less than $100,000, including salary and bonuses. That’s a 5.3% increase from 2008, in which 73.9% of the 294 advisors surveyed had earnings in the same bracket. As well, the number of advisors earning between $100,000 and $250,000 has dropped to 20.5% this year from 23.1%.
Although payouts might be on the decline, advisors still rate compensation highly in terms of importance, remaining at 8.9.
“I think that it’s normal to place maximum importance on compensation,” says an advisor in Ontario with Toronto-based Bank of Montreal, for whom 60% of his pay depends on meeting performance targets.
Executives acknowledge that advisors are in the grips of a compensation crunch. Although most firms have not, or will not, lower their incentive standards on mutual funds, they’ve adjusted their payouts on other products, such as loans, guaranteed investment certificates and high-interest savings accounts.
Adjusting payouts on products, as opposed to sales targets, is one reason why Montreal-based National Bank of Canada jumped ahead of the pack, as its advisors rated the firm’s total compensation a survey-best 8.3, which is an increase from its 7.9 rating in 2008.
“We reworked the compensation for our financial planners, on both the credit side and on the investment side,” says Denis Dubé, senior manager, public relations, at National Bank, pointing out that advisors now receive compensation for issuing loans similar to that for opening saving accounts. “This was not case before, as they were compensated less for loans. Now, it’s equal across the board.”
That said, the sales targets the bank set for its advisors in July 2008 have remain unchanged, Dubé notes, adding that declines in sales are a part of the natural ebb and flow of the advisory business.
Similarly, Toronto-based Royal Bank of Canada also has left its sales targets unchanged, but has increased its commissions on some products. “We have increased commissions on GICs, as well as on the third-party mutual funds they bring in,” says Michael Walker, vice president and head of branch investments for RBC, pointing out that advisors previously were paid less on transfers of third-party funds than they were on new sales.
Additionally, in light of clients opting for more short-term investments, such as GICs, RBC has made the compensation adjustment in the middle of the fiscal year instead of waiting for its annual review. “There has been no doubt that the market conditions created challenges,” Walker adds, “but we’ll march on.”
Some banking-sector advi-sors, however, say their firms could soothe the pain of fewer sales with appreciation or reward programs.
“There could be more recognition programs,” says an advisor in Alberta with Toronto-based TD Canada Trust.
Adds an advisor in Alberta with Edmonton-based Servus Credit Union: “It would be great to have some sort of recognition for outstanding achievements.”
Toronto-based Bank of Nova Scotia has paid homage to its top advisors through its Scotia Applause program for the past eight years. Through the tiered program, advi-sors in various sales levels receive recognition on a daily, quarterly, semi-annual or annual basis.
At the bottom end, Level 1 rewards are recognition certificates bestowed more or less daily; at the top level, Level 4 rewards are awarded on an annual basis. These can include a spot on an annual incentive trip for an advisor, or a celebration for an entire business unit.
@page_break@Additionally, Scotiabank advi-sors also collect points for every recognition certificate they receive under the Scotia Rewards program, which can then be redeemed for merchandise listed in a 400-item catalogue or for loyalty points on their ScotiaGold Visa cards.
Although one Scotiabank advi-sor in Ontario says that he “would rather have the equivalent dollars in my pocket,” the bank has found otherwise, says Wendy Hannam, Scotiabank’s executive vice president of domestic personal banking and distribution: “We have considered cash rewards. But when we polled our advisors, the majority preferred points over cash.”
Meanwhile, RBC ties its rewards in with its sponsorship of the Vancouver 2010 Winter Olympic Games. When an individual or team meets sales goals, Walker says, “[They] can win tickets to the Olympic Games or even a spot as a torch relay runner.” IE