Are advisors getting the short end of profit pie?

CEO bonuses are a sure way to fuel perceptions of compensation injustice lower down the advisory food chain, but news that the chief executive of Avantax could walk away with a golden parachute payment worth $21.6 million raised an extra eyebrow or two.  

As reported by InvestmentNews’ Bruce Kelly, Christopher Walters is in line for the payout — a cash-equity split worth about three times his total compensation in 2022 — once the sale of the firm to Cetera Holdings is complete. In addition, Todd Mackay, the head of broker-dealer Avantax Investment Services Inc., is in line to receive a package close to $6.1 million, according to the same SEC filing.  

Good luck to them. Being CEO is not for the fainthearted and, as the head of the relatively small, tax-focused broker-dealer, Walters got the deal done and delivered value to shareholders — Capitalism 101. However, what may stick in the craw of the 3,100 advisors left to transition to Cetera is that, as also reported by Kelly, very few are likely to receive any transition money — or stay bonus — and if they do, it’ll be slim pickings.  

The disparity in fortunes between the leaders and those at the coalface is striking. Of course, whining about a wealth professional generating wealth is like Usain Bolt complaining about the size of his medal collection. But unlike Bolt, who won those races by himself, Avantax advisors played a significant role in generating the company’s riches and share price. They may well feel aggrieved at their relative lack of reward.  

At the same time these details were made public, the unrelated 2023 InvestmentNews Benchmarking Study, Advisory Compensation & Staffing and Pricing & Profitability, sponsored by SEI, was being digested. Based on information from more than 100 advisory firms, it offers valuable insight. The study concludes that while firms remain very profitable, compensation for advisory positions has grown only modestly in the past five years. The support advisor position remained almost unchanged at $65,500 in 2022, while lead advisors had a median salary of $137,904, compared to $135,000 in 2021. This issue contains an excerpt, along with details on where to download the full report.  

At a time when it’s widely recognized the industry needs to attract more young talent to replace aging professionals and connect more meaningfully with the next generation, this flatlining in salaries is not an attractive look.   

Of course, low compensation does not impact CEO bonuses and nor should it; by the nature of business, these executives should be the crème de la crème of our industry and be rewarded as such. But should advisors, those interacting with clients daily, earn a bigger share of the profit pie? It sure looks that way, and one can hazard a guess a few Avantax advisors feel the same.