When it comes to total compensation, the bankers surveyed for this year’s Account Managers’ Report Card say their financial services institutions are finally starting to meet their expectations.
Overall, advisors gave the total compensation category an average performance score of 7.9, an improvement from 7.3 in 2007. And although there’s still a big gap between how important advisors consider compensation to be — the category received a rating of 8.9 in importance, a full percentage point more than advisors rated their firms’ delivery — that gap is closes slightly each year. Last year, advisors rated total compensation as 8.6 in importance, creating a 1.3-point gap.
The jump in performance scores was led by three banks, which rated hefty increases from the previous year because of their renewed emphasis on rewards and recognition programs.
Toronto-based Royal Bank of Canada led the way in total compensation, with the top mark of 8.2 — a significant improvement over last year’s score of 7.6. Michael Walker, vice president and head of branch investments for Royal Bank, says the increased rating can be directly attributed to a restructuring of the compensation package; two years after it was first put in motion, the full effects are being felt.
“The true benefits of our new compensation program were really highlighted this past year,” he says. “What the compensation plan does is more clearly align doing what’s right for the client and getting rewarded for it. Total compensation is still in the same area, but now account managers can clearly see how they can affect their compensation by doing things for the client, such as developing a financial plan and deepening the relationship with the client.”
Royal Bank’s advisors say that other employee recognition initiatives, such as its employee rewards program, also play a big role in their improved satisfaction. “The bank gives a variety of things, such as trips and gift certificates [along with the points],” says a Royal Bank advisor in Ontario, adding that the bank’s “equity-matching is excellent.”
Walker recognizes that incentives of this type are important and says they will continue — as long as advisors keep providing the right service experience for their clients.
Toronto-based TD Canada Trust, which ranked second in total compensation behind Royal Bank, also enjoyed a big turnaround from last year, to 8.1 from 7.2. Although its executives could not be reached for comment, a TD advisor in Ontario had this to say: “The compensation is competitive. We have moved by leaps and bounds when it comes to mutual fund sales. There are many opportunities for growth.”
Toronto-based Bank of Nova Scotia was the third bank to see a significant jump in its total compensation rating this year, to 7.9 from 7.0 in 2007. Like Royal Bank, Scotiabank has focused on recognition and rewards.
“We continue to evolve our compensation program for financial advisors,” says Wendy Hannam, Scotiabank’s executive vice president of domestic personal banking and distribution. “Last year, we increased the incentive compensation program for advisors, providing an opportunity for higher bonuses. On top of that, we introduced a special bonus program for the top 10% of advisors.”
Given Scotiabank’s stark improvement, it’s evident that the bank’s advisors deeply appreciate the efforts. One Scotiabank advisor in Central Canada says fair compensation and salary are the reasons he would recommend his bank to another advisor.
Adds a colleague: “The bank not only looks at the bottom line and makes shareholders happy, but it is also looking at making employees happy because we’re the ones who drive the business.”
Although the three banks led the increase in the total compensation score, the one-point gap still remains between how important advisors rate total compensation, on average, and how their banks are delivering.
Jim Lund, national program director for the investment solutions network at Toronto-based Bank of Montreal, blames the gap between importance and performance scores on advisors’ collectively unrealistic expectations of the market: “The grass is always greener on the other side — until they actually look into it. I am quite confident that our total compensation levels hold up against other financial institutions. Our average financial planner is making more money this year than last year. And, given the investment climate we are in, that is quite an accomplishment.”
Although, as Lund says, BMO advisors are earning more than last year, BMO advisors gave the bank a 7.7 rating in the category — a full point behind their collective importance rating of 8.7. Only Toronto-based CIBC, which had the lowest rating in the category at 7.4, did worse.
@page_break@One BMO advisor in Central Canada calls the bank “one of the worst-paying institutions” — a claim Lund denies: “We are the only folks I am aware of on the Street that pays its financial planners the same no matter whether their clients buy a retail investment product or do business through BMO InvestorLine, BMO Harris Private Banking or BMO Nesbitt Burns Inc. It means we can assure our clients that our recommendations put their best interests above all else.”
But another BMO advisor in Central Canada believes the bank’s total compensation would be far better if it gave a raise for referrals on the credit side of the business. Lund, however, says that’s a “tricky” business: “In the branch system, we would do well to ensure there is no undue pressure on our loan adjudication for approvals because a commission relies on it.”
Although CIBC executives did not grant an interview, CIBC advisors — who rate compensation at the bank an 8.7 in importance vs 7.4 in performance — say the poor result has everything to do with inconsistency. Says a CIBC advisor on the West Coast: “Compensation changes every November and there’s a new business vision every year.”
Adds a CIBC advisor in Ontario: “They changed the way our share rewards work. Now, we have to wait three years before we are eligible.”
But not only the low-performing firms fail to meet advisors’ expectations. Even Royal Bank is affected by the discrepancy between performance and importance ratings. Although its performance rating is a category-topping 8.2, its advisors say it’s a 9.4 in importance.
Walker says this has everything to do with employee expectations — and it’s not a phenomenon limited to the financial services industry. “Compensation is absolutely important to advisors and so is the total, overall benefits program,” he says. “One of the challenges advisors have, though, is: ‘How do you evaluate your compensation against that of other firms?’”
To solve this problem, Royal Bank has implemented a stringent compensation review program. “Each year, we review our compensation against the industry benchmarks,” Walker says, “and see how we’re doing in the marketplace, so we can provide that more transparent data to our salespeople about how they’re doing and how they’re positioned relative to the competition.” IE