Financial advisor compensation: The modernization of compensation platforms

Compensation reporting

Wealth managers have access to clear and accurate reporting on advisor compensation that can be viewed dynamically through a variety of metrics and time frames. Compensation from different sources, including referrals allocations across product types and advisor, banker or relationship manager roles, can be tracked and assessed across individual trades, accounts, households, advisors and teams, while insights into branch and national sales performance can be obtained to support and shift firm strategy where necessary.

Benchmarking

Firms can benchmark their compensation structures against competitors in the wealth management industry from multiple perspectives, such as by advisor, team, branch, geography, etc. This is so that, in an evolving landscape, compensation plans remain competitive and aligned with industry standards.

Compensation modeling

Modern tools enable wealth managers to perform a variety of scenario analyses to allow advisors to model the impact of team structure changes and home office employees to assess the potential impacts of broad compensation plan changes. By simulating different incentive structures, firms can evaluate the potential outcomes and make informed decisions on how to optimize their compensation plans.

Incentive development

Through access to comprehensive compensation data, firms can leverage information to identify incentives that can drive specific product and service growth. By analyzing compensation data, patterns can be identified to understand which incentives should be implemented to increase profit margin and drive growth.

Implementation

Modern compensation platforms offer the advantage of quick implementation and adjustment of compensation plans. With automated processes and real-time data, firms can easily adapt their compensation structures to respond to changes in products and services offered, the market, regulatory requirements or business strategies.

Ernst & Young LLP (EY US) delivers comprehensive support in all aspects of modernizing financial advisor compensation platforms and strategies. From our experience supporting wealth managers across the front, middle and back office to delivering end-to-end technology solutions, EY US can help firms position themselves to drive growth in rapidly changing world.

Compensation platform assessments

EY US conducts comprehensive assessments of wealth managers’ compensation platforms. We evaluate their maturity, identify any gaps and provide actionable recommendations for remediation to boost performance.

• Leverage existing EY detailed evaluation criteria.
• Lead due diligence discussions with pre-developed questions and expected key performance indicators (KPIs).

Compensation platform development and implementation

EY US assists wealth managers in developing and implementing compensation platforms, whether it involves supporting internal development or integrating external platforms. From planning to execution, our professionals have track record for a seamless process and successful implementation.

• Develop detailed process maps outlining future-state operations.
• Develop detailed roadmaps with experience-driven timelines and required vendor-provided deliverables.

Assess advisor compensation strategy

EY US offers guidance in assessing advisor compensation strategies to enable wealth managers to align their compensation models with their growth objectives. Our team helps identify appropriate compensation models and incentives that drive performance and foster growth.

• Assist in compensation data collection and analytics.
• Conduct benchmarking exercises to compare the compensation packages offered with those of competitors or industry standards.
• Evaluate incentive programs in place to measure their effectiveness in driving desired advisor behaviors and outcomes.
• Provide formal recommendations on advisor compensation strategies, policies and incentives.

Despite fears of digital channels and solutions reducing the role of the advisor in recent years, it is clearer than ever that the advisor-client relationship sits at the core of the wealth management industry. With the use of modern compensation tools, wealth managers can develop plans that retain and motivate their advisor base while growing targeted products and services. Firms that succeed in implementing modern, flexible compensation solutions will be well positioned to adapt to meet advisor and firm needs over the next decade.