Bank and credit union employees aren’t necessarily happy with their “base plus bonus” arrangement. On the other hand, they aren’t exactly unhappy.
In this year’s Account Managers’ Report Card, participants were asked for the first time to rate their firm’s compensation. On a scale of zero to 10, with 10 being excellent, the average rating for compensation in the 2004 Account Managers’ Report Card was 6.9. This is one of the lowest ratings of the 24 categories in the survey.
Advisors at the banks seem to be resigned. “What can you expect?” comments one personal banker in Atlantic Canada. “Who doesn’t want more money?”
Yes, more is good, but otherwise the account managers surveyed at the banks and credit unions aren’t sure what they think of how they are paid. When asked about the best and worst aspects of their firms, account managers placed compensation in both categories. And more than a quarter, or 25.8%, of the account managers surveyed listed compensation as one of the main reasons that would prompt them to switch firms.
According to the Report Card, credit union account managers are the most content with their pay, followed by TD Canada Trust and Bank of Nova Scotia, which are tied for second place, National Bank of Canada and CIBC. Bringing up the rear are Royal Bank of Canada and Bank of Montreal.
But account managers don’t seem overly upset about the subject. When asked what would tempt him to switch firms, a TD Canada Trust account manager in southwestern Ontario replied: “More money. But I don’t see anyone offering it.”
Even the credit unions, while taking top honours in this category, don’t seem to be doing anything different than the banks. Like the banks, credit unions work on a “base plus bonus” system, says Don Rolfe, president and CEO of Credential Financial Inc. and Ethical Funds Co. in Vancouver. The principal difference between the two types of institutions is that credit union employees “are not only staff but also members of the credit union. So they actually have ownership or a piece of it,” says Rolfe, which boosts morale.
Scotiabank hopes this strategy will pay off as it encourages employees to own stock. The bank stresses that, like credit union staff, employees are not only “responsible for the bank’s results but they can also directly benefit, as well,” says Sue Graham Parker, senior vice president of retail and small-business banking at Scotiabank in Toronto.
Although account managers would like to have more money in their pockets, they are unsure of how that can happen. They aren’t thrilled about the alternatives. The prospect of going to straight commission based on product sales is listed among reasons for leaving, and several managers say they prefer the banks’ more stable compensation structure.
Commissions for selling products are as unappealing to the banks as they are to their account managers, and “product neutrality” is the goal of all the major banks’ compensation structures. “About 80% of revenue generated by the employee is on a fixed-salary basis because we don’t want conflict of interest,” says Paolo Pizzuto, Montreal-based National Bank’s vice president of sales and services strategy.
So banks are developing creative ways to compensate good work without pressuring agents to sell certain products. All the financial institutions we spoke to compensate their agents with a base salary plus a variable component. The base salary is 70% or 80%, depending on the bank. The variable component depends on anything from sales volume, referrals and client satisfaction to the organization’s overall performance.
The way in which organizations compensate employees says a lot about expectations, making compensation structures an extension of the firms’ strategic goals.
Royal Bank, for example, pays its account managers a base salary plus bonuses. The variable component is weighted in favour of the long-term financial solutions the bank believes best serve its clients. “Variable components are focused on several factors: client experience, ethics and values, and volume of business,” says Matt Varey, senior vice president and director, RBC Investment Financial Planning, in Toronto. “Generally speaking, we’ve changed compensation to reflect the longer-term solutions we’re offering clients.”
At Scotiabank, the incentive component is “based on both individual performance as well as the performance of Scotiabank,” says Graham Parker. The bank’s variable component reflects, among other things, the success of the entire organization, so employees have a vested interest in the bank itself, not just their own books.
Individual performance is based on customer satisfaction, not volume of products sold. To determine the level of customer satisfaction, the bank’s clients are surveyed regularly.