It's Payout Change Season!

It’s Payout Change Season! For Retail Financial Advisors with the Big Firms, Autumn is when leaves fall, when the weather cools, and when payouts change. Senior managers at the big firms love tinkering with the way Advisors get paid. Publications plan their big “Payout Issues” and everybody struggles to understand the latest changes. Some observations: 1. It is an exercise of futility to make a career decision based on payout. Since all the firms change their payouts often, crunching numbers on your old firm’s payout vs. your prospective firm’s payout is just a waste of time. The two point swing one year will just be a two point swing in the other direction the following year. 2. Though grids have become simpler over the last few years, the payout plans themselves have become more complicated. Grids are easy to understand; produce X and get paid Y% on that amount. However, every firm has a small ticket policy, whereby Advisors do not get paid on a ticket below a certain amount. Throw in a complicated discount sharing policy, a small account policy, growth incentives, deferred compensation, some product payout differences, and you realize that it takes an advanced degree and a scientific calculator to truly figure it all out. 3. Firms use Payout Plans as a way to encourage certain behavior. The Morgan Stanley Smith Barney plan just released and covered in Investment News and other publications gives substantive bonuses to bring in new assets. Past payout plan changes at the Big Firms rewarded Financial Planning processes and fee based business. Want to learn what the focus of the Big Firms is for the new year ahead? Read the fine print of the new payout plan released in the fall. 4. Finally, the street-smart Advisor knows that there is only one way to truly know their payout, through all the fine print and details: At the end of the year, put your W2 amount in a fraction over your total production. I guarantee it will not be the same number that you thought it would be on the Grid when you got it the previous October.