Beyond payroll: What makes broker-dealers successful

Adviser compensation management is about more than adviser compensation.

Apr 2, 2018 @ 1:44 pm

By Michael Brodeur

Every wealth management firm understands how its ability to attract and retain advisers impacts its financial health. Yet, there are challenges: New regulations, an aging field force, and the emergence of alternative distribution channels must all be addressed.

Across the industry, adviser churn is climbing, head counts are declining and adviser loyalty is waning. A 2017 study by J.D. Power shows that year-over-year adviser satisfaction continues to decline. Nearly 17% of employee advisers indicate an inclination to leave their firm. And top-performing advisers are among the least satisfied.

No doubt the data seem bleak. Adviser dissatisfaction is partly a consequence of market trends outside of broker-dealer control. However, several challenges can be addressed directly.

Leading firms are leveraging their compensation management systems to boost adviser satisfaction and attract and retain top adviser talent. A comprehensive, modern compensation management solution can improve data access and drive new data insights, which can make life much easier for advisers.

Consider the challenges that contribute to dissatisfaction.

1. Advisers lack the data insight needed to make business-critical decisions. Many advisers report a phenomenon called "data inundation." There's an endless mountain of available data, but no way to access it efficiently. Data sources are disparate, which contributes to data fragmentation and an incomplete view of their clients among advisers.

Too often, advisers scramble to assemble data on their own, manually stitching together a picture from an array of different resources. Consequently, data inundation promotes inaccuracy and error. Advisers don't have the insight they need to make critical decisions.

2. Advisers confront inefficient workflows. Many advisers report that they spend too much time on back-end processes, compliance, record keeping and commission tracking. Proactive broker-dealers are at great pains to introduce new systems to improve workflow efficiency and increase the productivity of their advisers. Unfortunately, ad hoc solutions are often incompatible with existing business ecosystems, which only compounds the problem.

3. Broker-dealers struggle to deliver differentiated support for advisers in the field. Most work hard to find the resources needed to support early-career advisers through mentoring, training and continuing education programs. At the same time, they consistently look for ways to support seasoned veterans too, aiming to provide marketing support and the optimum product mix to increase margins and boost asset acquisition. Unfortunately, many broker-dealers struggle to effectively target limited resources where they are needed most.

(More: Financial advice industry must give 'soft skills' the credit they deserve)


Gone are the days where compensation systems represent mere commission calculators. Today's end-to-end solutions provide the automation and streamlined workflows needed to achieve more. Industry leaders integrate data aggregation tools with compensation management systems to boost transparency, improve visibility and help advisers gain needed insight for better decision-making. There are three ways in which they can make a difference.

1. Help advisers manage their practice. Advisers rely on compensation management systems to improve data accessibility, creating a holistic, 360-degree view of their business and the clients they serve. Among other things, built-in data aggregation tools enable advisers to instantly identify the allocation of assets under management and locate products that may boost profitability.

These systems also enable advisers to segment their client base and identify the recurring and one-time revenue sources that drive the value of their practice. Ultimately, if timely data are all in one place, advisers don't have to scramble for the information they need to make key decisions about the direction of their practice.

2. Improve day-to-day workflows. Regulations are burdensome because they require compiling data from myriad resources, which can be an error-prone and time-intensive process. But the data aggregation tools associated with a robust compensation management solution can automate the process and drastically improve operational efficiency.

Advisers and support teams can access aggregated, real-time reports and generate detailed audit trails to adhere to changing regulations. It's not just reporting and archiving: An effective adviser compensation management solution can show total and underlying fees at the firm, adviser and investor levels, which helps improve fee transparency for compliance purposes.

3. Identify and implement strategies that impact adviser satisfaction. By precisely tracking sales and compensation, relevant decision-makers can understand investor preferences, trends and behaviors. Using this data, broker-dealers can identify the best product mix and provide regional marketing support for advisers.

In addition, broker-dealers have started to use data compiled through these solutions to glean valuable insight into adviser performance. Various tools make it possible to zoom in to different regions and offices and even track the performance of individual advisers. Such data can help broker-dealers target specific support for struggling advisers and pair mentors more effectively.

In summary: The success of any broker-dealer depends on its ability to attract and retain productive advisers. Given the importance of compliance reporting for both firms and advisers, a dynamic, comprehensive, user-friendly and action-oriented adviser compensation management system should be considered a critical component of success.

(More: How market moves affect advisers' bottom line)

Michael Brodeur is vice president of advisor compensation solutions at Broadridge Financial Solutions Inc.


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