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How the Best OSJs Retain and Compensate Advisors

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This is the second of a two-part series on how to recruit, retain and compensate advisors for your branch. In our previous posting, we focused on recruiting; below, we focus on how OSJs can best retain advisors at their branches through compensation and support.

At Cross-Search, we hear almost every day from advisors who are looking to leave their OSJ (Office of Supervisory Jurisdiction) because they no longer see value in staying. And consistently, we see that advisors who stay with their OSJ for the long term do so because of the value they receive in exchange for what they give up in payout.

In the first of this two-part series (Successful Tactics To Grow Your Branch), we talked about the importance of determining your unique value proposition for recruiting advisors to your branch. This value proposition is also crucial to retaining and determining compensation for those advisors.

The value proposition of successful OSJ branches to its advisors lies in the support offered to them. In fact, many successful OSJ branches resemble “mini-broker-dealers” with fully equipped offices, support staff, marketing materials, regular meetings with outside experts, networking opportunities and more. These OSJs act as liaisons between their advisors and the broker-dealer, offering support that allows advisors more time with their clients and less administrative hassle. One successful OSJ manager we know even gave up managing her own clients in order to service her branch full-time. In our experience, advisors at these types of OSJ branches rarely leave.

Consider that many advisors initially join a branch office when they transition to becoming independent. Initially, they may be happy without OSJ-provided office space or other support because their payout will still be more than it was at their wire house. In our experience, however, advisors in this situation typically leave once they’ve learned the ropes of independence. They don’t see the value in staying when they can replicate a similar situation on their own with the addition of license. Yet this is typically not the case for those who receive services of tangible value from their OSJ.

So how do you compensate advisors in your branch? In our experience, the average OSJ charges 5% to 8% for supervision only, without office space or any additional services. While compensation for a supervision-only situation may be simple to pinpoint, determining what to charge for those extra, value-added services is trickier because of the broad variance of costs across different markets.

For example, office space in New York City will likely cost more than equivalent space in a small rural town in the Midwest, as will salaries for support staff. This means any formula created to calculate the percentage of payout for services offered would be skewed.

The bottom line, however, is that in order to retain advisors in your branch and justify their compensation, your value proposition must qualitatively outweigh what you charge. Successful and growing OSJs offer value their advisors feel is justified and worth what they give up in commission, and therefore serve as compelling reasons to stay with that branch for the long term.