Large advice firms are increasingly focused on organic growth but pay still rewards the book an adviser holds rather than the clients they win, according to a new remuneration benchmarking report published today.
Consultants NextWealth, who carried out the research, said its report reveals a disconnect between firms’ growth ambitions and the incentives they offer advisers to win new clients.
The report showed that revenue was the main bonus metric at seven of 13 firms that provided details of their bonus criteria, including six of the seven scaled consolidators, those with 50 or more advisers and growing by acquisition.
Only a handful pay more for clients an adviser wins than for those the firm hands over.
NextWealth said the findings showed that while there was little difference in entry level pay across firms of all sizes and growth strategies, the opportunities to grow salary once at a firm varied widely.
It said headroom in salary progression was greatest at scaled consolidators, where advisers can grow their salaries to an average four times entry level pay, compared with roughly double elsewhere. However, these were also the most likely to link bonuses to revenue.
Emma Napier, NextWealth consulting director and the report’s author, said: “If you’re a large firm you need to give advisers a reason to build their careers with you, and that takes a strong culture and the right incentives.
“However it’s clear from our research that not everyone is structured to do that and reward growth. Only a handful of firms actually differentiate pay depending on whether the adviser has ‘inherited’ a client or brought in new business themselves, which does leave you wondering where the incentive is to win new business at the rest of the firms.”
The report analysed how larger and consolidating advice firms pay their advisers, benchmarking everything from salary bands and progression, bonuses and incentives, contracts and equity, and the support and benefits around them – combining the firms’ own pay data with NextWealth’s proprietary research to evidence how firms pay their advisers and whether pay is being used as a lever for growth.
• The report is based on data collected in August from 18 advice firms, representing an aggregated 1,077 financial advisers and approximately £72bn of client assets. There were seven in-depth interviews: six with senior leaders including COOs and CROs at advice firms that took part in the data request and one with a former chief executive of an advice network.