Credit Unions, Banks Boost Adviser Incentives
Some credit unions and banks are offering recruiting incentives to financial advisers that guarantee prior year’s earnings for those currently producing in the $500,000 range.
That’s according to a new survey, Recruiting Packages for Financial Advisors in Banks and Credit Unions, from research firm Kehrer Saltzman & Associates and sponsored by Cetera Financial Institutions, a broker-dealer and registered investment advisory company.
Taking a look at 11 plans at 30 firms, KSA analyzed the adviser’s total earnings, earnings compared to the prior year, total adviser payout percentage and the firm’s breakeven point after overhead expenses at various levels of a recruit’s production.
“What is most encouraging is the profitability break-even point for the firm with many of the incentive packages is very attainable. The key is in the incentive design,” said Peter Bielan, a principal of Kehrer Saltzman in Charlotte, N.C., and project director for the survey.
Among the survey’s highlights was a clear and conscious effort to pay for the adviser currently doing the type of business the firm wanted, and in many cases either past or anticipated advisory business had a role in that payment, said LeAnn Rummel, executive vice president and national sales manager of Cetera.
Those firms that have designed recruiting incentives to address what matters most to advisers also had an edge, particularly lures that noticeably distinguish themselves from the common industry recruiting packages according to the KSA study.
“The standard $40,000 base salary and 40% guaranteed payout is no longer competitive,” KSA noted.
“With our industry benchmarks demonstrating that the client base of financial institutions can support up to twice the number of advisers than are in place today, the firms that are aggressively adding profitable incremental advisers are going to outpace the firms that are trying to get all of their growth organically,” said Kenneth Kehrer, who participated in the analysis of the study.
He added, “The firms that have the most effective recruiting incentives have made a solid business case and have won the full confidence of the parent institution’s executive management in their hiring ability.”