Is your compensation suffering?

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May 14, 2009 12:22 pm

Most wirehouse advisors I spoke to recently are having a tough time right now, and many have seen their compensation decrease by on average around 20 percent....not to mention, their deferred compensation has taken a hit with their companies stock declines. It seems things are not much better for independent b/d reps and RIAs who are mostly fee-based and may have seen a decline in their AUM.

I am trying to get an accurate picture of how advisors personal finances are doing...if compensation has declined, by how much, when did it start declining and why?


Is it possible that compensation grew for advisors over the last year?

May 15, 2009 6:02 pm

I wish they would create an ETF that shorts Advisors' fees/trails over the last 12 months.



It's common sense that as the market goes down, so does Advisors' comp if they do a lot of fee based and trail based business. I've held my income fairly steady by working harder and using fixed income and annuities to get a little extra upfront commission.

May 15, 2009 10:19 pm
staffwriter2:

Most wirehouse advisors I spoke to recently are having a tough time right now, and many have seen their compensation decrease by on average around 20 percent....not to mention, their deferred compensation has taken a hit with their companies stock declines. It seems things are not much better for independent b/d reps and RIAs who are mostly fee-based and may have seen a decline in their AUM.

I am trying to get an accurate picture of how advisors personal finances are doing...if compensation has declined, by how much, when did it start declining and why?


Is it possible that compensation grew for advisors over the last year?



Wow...you are a professional journalist and you don't know the possessive plural form of "company"?

Maybe I'm in the wrong line of work....

May 27, 2009 1:14 am

Wow, "possessive plural"...I don't think I've heard that since grade school!


(However, I think the correct term is "plural possessive")
May 27, 2009 10:03 am

Every asset class except government securities is down, and you're wondering whether or not it is a rumor that advisor compensation is down.  Really?  You're serious?  FYI, successful people in this career path earn significantly above average income.  That said, it tends to be highly variable income.  We are grossly overpaid in good times, and significantly underpaid in the tough times.  

 
Good advisors actually save, invest, and diversify (in many cases out of the stock market since our income is tied to that) excess income during the good times.  They don't wrap themselves up in $500K lifestyles like surgeons, because their income may not be $500K next year.  (See "variable" above.)   Advisors who do live like this are called "morons" or "wirehouse brokers".  When their compensation goes down, they simply move firms and take an upfront check to smooth out their compensation which gives them time to cut back on some lifestyle comforts until things improve.  When things do improve, they will inevitably make the same mistakes, and wind up moving again.  They will repeat this process 3 to 4 times during their working career, and wind up significantly less well off than they feel they should be based on the money they made during their careeer, and will look forward to the SS deposit into their checking account around the 1st of each month.
 
Good advisors will meticulously plan a move to free themselves of this "rat-on-the-wheel/ mouse-looking-for-the-cheese-in-the-maze-of-life" cycle.  They will save some money, and then invest that money in themselves, their family, their practice, and their clients by going independent.  Their incomes might be down 20% in times like these, but they still think they have the best job in the world.  They will pull through on the other side through their own hard work and dedication to this craft.  They appreciate their clients more than ever in times like these, and vice-versa.  Despite the drop in inome, there is no visible change to the outside world in how they run their business or personal lifestyle.  Why?  Because they are adults who actually practice taking care of their own money the same way they coach others to take care of theirs.  After 25+ years in this world, they will check out very comfortably retired to pursue other interests, and give their children (if they choose to work very hard) a good headstart in a professionally rewarding career. 
 
Go write a story about that! 
May 27, 2009 10:10 am

Advisors who do live like this are called "morons" or "wirehouse brokers".





May 27, 2009 11:17 am

Actually, I know some advisors who's incomes are up.  Specifically, both of them have more than 2/3 of their business in 401K's.  The new inflows and new plans they acquired during the year more than outpaced the drop in trails they get.  I know this is not the "typical" advisor, but it's just one strategy that a few advisors out there use.  And it is very prominent in my area, which is very insurance-heavy (lots of annuity-based 401K plans in my state).

May 28, 2009 12:25 am
Soothsayer:

Every asset class except government securities is down, and you're wondering whether or not it is a rumor that advisor compensation is down.  Really?  You're serious?  FYI, successful people in this career path earn significantly above average income.  That said, it tends to be highly variable income.  We are grossly overpaid in good times, and significantly underpaid in the tough times.  

 
Good advisors actually save, invest, and diversify (in many cases out of the stock market since our income is tied to that) excess income during the good times.  They don't wrap themselves up in $500K lifestyles like surgeons, because their income may not be $500K next year.  (See "variable" above.)   Advisors who do live like this are called "morons" or "wirehouse brokers".  When their compensation goes down, they simply move firms and take an upfront check to smooth out their compensation which gives them time to cut back on some lifestyle comforts until things improve.  When things do improve, they will inevitably make the same mistakes, and wind up moving again.  They will repeat this process 3 to 4 times during their working career, and wind up significantly less well off than they feel they should be based on the money they made during their careeer, and will look forward to the SS deposit into their checking account around the 1st of each month.
 
Good advisors will meticulously plan a move to free themselves of this "rat-on-the-wheel/ mouse-looking-for-the-cheese-in-the-maze-of-life" cycle.  They will save some money, and then invest that money in themselves, their family, their practice, and their clients by going independent.  Their incomes might be down 20% in times like these, but they still think they have the best job in the world.  They will pull through on the other side through their own hard work and dedication to this craft.  They appreciate their clients more than ever in times like these, and vice-versa.  Despite the drop in inome, there is no visible change to the outside world in how they run their business or personal lifestyle.  Why?  Because they are adults who actually practice taking care of their own money the same way they coach others to take care of theirs.  After 25+ years in this world, they will check out very comfortably retired to pursue other interests, and give their children (if they choose to work very hard) a good headstart in a professionally rewarding career. 
 
Go write a story about that! 
 
Wow, wonderfully expressed. 
May 28, 2009 1:13 am
staffwriter2:

Most wirehouse advisors I spoke to recently are having a tough time right now, and many have seen their compensation decrease by on average around 20 percent....not to mention, their deferred compensation has taken a hit with their companies stock declines. It seems things are not much better for independent b/d reps and RIAs who are mostly fee-based and may have seen a decline in their AUM.

I am trying to get an accurate picture of how advisors personal finances are doing...if compensation has declined, by how much, when did it start declining and why?


Is it possible that compensation grew for advisors over the last year?



Since most of your replies were not what you're looking for, maybe this will help.

I own an RIA firm that is fee only.  AUM grew by about $20mm last year and my income increased by about $150k.  The positive of the last 1 1/2 years is that there are a lot of opportunities to bring in new hnw clients; especially for asset managers who produced much better than normal results.

For the majority on this forum and in this industry - investment losses alone wiped out a good chunk of production/fees/etc.  But many also were net negative on client retention/aquisition.

As with most industries - Pareto's principal has been and always will be in full effect.  It's just that even the bottom 80% of advisors can increase their incomes in a rising market.  That simply wasn't the case last year.

Good luck with your story.

Jun 1, 2009 3:48 pm

Well put Soothsayer I think that is what we call old fashioned planning.

Jun 1, 2009 11:55 pm
Soothsayer:
  They don't wrap themselves up in $500K lifestyles like surgeons, because their income may not be $500K next year.  (See "variable" above.)   Advisors who do live like this are called "morons" or "wirehouse brokers".  When their compensation goes down, they simply move firms and take an upfront check to smooth out their compensation which gives them time to cut back on some lifestyle comforts until things improve.