21 July 2018

Brokerages Considering New Compensation Models

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As the economy evolves and new generations start entering the workforce, will financial service firms adjust to the barriers to making the advisory field a career choice? Brokerages are certainly having a harder time attracting new advisors. Now at least one wire house, Wells Fargo Advisors, is considering changing its compensation formula, putting more emphasis on salary versus variable compensation.

Last year, research by Cerulli showed the graying of financial advisors: the average age is 51, with most wanting to retire at 68.

Not only do experts think a new model is needed for Millennials, but the world has changed as well — with more no-call lists making cold calling more difficult for new advisors. In addition, lower earners at wire houses enjoy a lower payout. Some also think that less emphasis on commissions would be better for clients; regulators in other countries like the UK seem to be favoring this model. Additionally, some think a higher-salary model would be more attractive to women and minorities — groups that are poorly represented among financial advisors.

But others are concerned that a higher-salary model would increase layoffs during downturns. It certainly makes less sense for IBDs. But change is coming — the question is whether brokerage houses will adjust to it.

Click here for the original article from NAPA Net.

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