IRVINE, Calif. — In response to complaints from brokers, Smith Barney has tweaked the final version of its new pay plan.
The new compensation package, effective at the start of this year, was finalized only last month. The biggest last-minute change was a substantial increase in the new company-funded expense accounts.
At some high-end-production levels, the amounts were doubled from what originally was planned.
In addition, reps can use the money to pay for sales assistant bonuses.
Smith Barney, a unit of New York-based
Citigroup Inc., says the pay changes are in response to its settlement of a class action last May for $98 million.
The company was sued for alleged violations of overtime pay laws and for policies that make brokers chip in for business costs, such as sales assistant bonuses.
As a result, the firm is giving sales assistants a raise and is picking up the tab this year for all assistant compensation formerly paid by brokers.
Smith Barney believes its new pay schedule will keep it in compliance with labor laws.
One of the latest changes was to increase the maximum pay range of sales assistants in certain high-cost markets to $80,000 per year, said Smith Barney spokesman Alexander Samuelson.
At the same time the new pay plan cut payouts in certain areas, the biggest hit is a 20% payout on the first $5,000 monthly gross.
Next year, some Smith Barney brokers will have to help fund their assistants’ pay, especially if they were paying significant bonuses (InvestmentNews, Jan. 8).
The last-minute tweaks to the plan could mollify those complaining that although the payout cuts would be permanent, reps still could end up paying for sales assistants.
The expense accounts now scale up to a maximum $20,000 at the $1.5 million production level. Originally, these top reps would have received $15,000 in expense account money.
At the same time, the firm lowered the minimum production needed to qualify for an expense account, from $300,000 to $250,000. Brokers who produce $250,000 to $350,000 now get a $1,000 expense account.
At $350,000 in annual production, Smith Barney brokers will get $3,500; those producing $500,000 will earn $6,000; $650,000, $9,000; $850,000, $12,000; and $1 million, $15,000.
Those are increases from what was first proposed last December when $500,000 in production would have earned $3,000; $750,000, $5,000; and $1 million, $10,000.
“It’s kind of nice to have the extra discretionary marketing dollars,” commented one Smith Barney broker, who asked not to be identified.
In 2008, brokers also can pay bonuses to assistants by transferring gross production to them.
The firm is helping assist-
ants become registered for that purpose.
However, the enhanced expense accounts “will alleviate the need in many instances for commission splits between [registered reps] and staff,” Mr. Samuelson said.
With the latest changes, the firm is kicking in another $26 million to fund the expense accounts, he said, in addition to another $100 million in various costs that brokers had been paying.
Smith Barney also has added back into its pay plan the “rule of 75” it previously had for its deferred compensation plan.
As a result, reps with 20 years of service who retire at age 55 can receive their unvested balances, Mr. Samuelson said.
In another change, brokers will get a 20% payout on fixed-income tickets that gross $50 to $75.
Smith Barney brokers receive no pay on tickets under $75 in gross, up from a $50 minimum last year.
Mr. Samuelson said the change was made after brokers complained that many bond trades generate little gross.
