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Advisors Stuck in the Middle: The Battle Between Control and the Bottom Line

As wirehouses battle to retain control of their channel and maximize profits, expect more advisors to vote with their feet in search of freedom and flexibility.

Corporate profit seems to driving the bus these days, and as it rolls along, it’s increasing the distance between advisors and the firms they call home. As a result, advisors are often left feeling as though they’re being forced to choose between maintaining their income level or best serving their clients’ interests.

Consider some of these recent moves by the firms:

  • UBS unveiled a comp change in June of 2017 in which the firm cut back the number of bonuses their advisors could earn as a way of having them focus more on asset growth.
  • The grid change announced in November by Merrill Lynch added both penalties and rewards to spur asset growth.
  • And Morgan Stanley’s message to advisors in December that it will raise grid thresholds it uses to pay brokers by about 10 percent to incentivize them to produce more revenue.

Certainly, there are many advisors who benefit from these changes, especially the most productive of the group who are asset-gathering machines. Yet even the best complain that there is something incongruent about being told how to run their businesses and which clients to take on. As one team put it, “The notion that the new comp plan requires us to behave in a certain way if we want to continue to be paid at the same grid rate borders on offensive.”

Clients first?

Advisors are living through a culture shift: one where firms are leading them down paths that may not be in the best interest of their clients or their careers and in direct conflict with the fiduciary standard they promised to uphold. For example:

  • A Merrill advisor who must make at least two client referrals to other parts of the bank to avoid a pay cut.
  • A Morgan Stanley advisor who will see his pay reduced by three percentage points for business done with clients residing outside the U.S.
  • A UBS advisor who will lose a bonus this year because he brought in many new clients but their net worth was below the threshold.

So as firms battle to retain control in an attempt to maximize profit by valuing quantity over quality, advisors are voting with their feet in search of a place where freedom and flexibility are part of the culture and vision of the organization. Which is why regional firms like Raymond James, RBC and Stifel, boutiques like JP Morgan Securities, and the independent space in general, are killing in the race for top advisor talent.

While it often feels like being caught between a rock and a hard place, the good news is that no advisor is truly stuck there. We’re lucky to be living during a time where vast changes have opened the doors to more and more opportunities that allow advisors to serve their clients and careers in a way that is more congruent with their own values. The key is to stay true to your goals and vision—and the money and happiness will follow.

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