November 10, 2023
Louis Diamond Quoted
by Jeff Berman
The three wirehouse firms that have disclosed their 2024 advisor compensation plans seem to be paying attention to advisors’ concerns over recent pay issues, industry consultants say.
The wirehouses “tried to layer in an element of listening to an advisor’s feedback and rolling back certain unpopular elements ([like] Merrill hair cutting brokerage commissions)” but fell “short of wholesale changes advisors were looking for,” according to Louis Diamond, president of Diamond Consultants, a recruiting firm.
“Our job is to understand hundreds of firms and get a deep understanding of an advisor’s preferences and personality,” says Diamond. “This is the part of the job that is more art than science. We can usually vet out poor cultural fits from the jump. Still, it’s incumbent upon the firm and advisor to do the hard work in establishing the quality of the connection.”
Meanwhile, Diamond pointed out: “A commonality amongst most of the new comp plans is firms recognizing that tying bonuses to net new households is a constructive way to incentivize advisors.”
This is, he explained in an email, “using more of the ‘carrot’ than the ‘stick,’ and data from Merrill and UBS likely shows that net new households acquired increased when they’ve had these elements.”
“While advisors much prefer simple comp plans where they can be trusted to run their business the way they want, it’s clear advisors are competitive and respond to growth linked bonuses,” he explained.
“In the end, with all the new comp plans, some advisors benefit, most remain neutral and some are hit pretty hard. In the case of Merrill, larger producers who consistently hit the old growth grid are now penalized based on the new structure,” Diamond noted.