Raymond James (RJF) rolled out a compensation grid for employee advisors last week that goes into effect in October. The firm changes its payout plan very infrequently, which means the new comp grid should be in place for at least several years.
The changes are generally seen as positive, since they will most likely be financially neutral to advisors across the firm, are “product neutral” for reps and include more compensation levels than before, experts say.
“They got rid of their past product-based compensation categories, which were limiting, and have stretched out their grid, which is much more like the current industry standard, with 10 tiers or so,” said Andy Tasnady (left), a compensation consultant with Tasnady & Associates, in an interview with AdvisorOne.
“It provides some additional incentives to work a bit harder to get to the next tier, where there are additional opportunities for higher payouts,” Tasnady said, rather than just reaching for the broader $1 million-and-up category that was in place in the earlier grid. “Now [in the next fiscal year], you can get an additional percent” for growing production to the $1.5 million- $2.5 million tier, for instance.
Raymond James’ wirehouse rivals have had a product-neutral grid for the past five to 10 years, he adds. “And doing this, in my opinion, was long overdue,” noted Tasnady.
Advisors and branch managers, like Steve Fricke or Orlando, Fla., say the product-neutral feature had been planned for some time. Fricke, a branch manager on the Raymond James & Associates Executive Council that worked on the grid, points out that—with the exception of some tweaking in 2010—grid changes are not part of the firm’s culture.
“This is really the first new compensation plan that I have seen in my 13 years here,” he said in an interview. “Unlike our competitors, compensation changes are not a regular event at Raymond James. When we do this, we want to be sure be get it right, so it can stay in place for some time, maybe even the next 20 years.”
The Executive Council, Fricke adds, “really aimed for a simple, easy-to-understand comp plan that was more in line with the industry, structurally speaking.”
When Fricke spoke with the 50 or so advisors that he supervises, he stressed that the plan aimed “to be revenue neutral for Raymond James, and that winners and losers would come out of it.” Still, he says, the pay increases for his branch should see “more winners than losers.”
Advisors had been given a “heads up” more than a year ago, Fricke said. “They knew we were going to a product-neutral grid. They’d examined their business mix and had made strategic changes, so they could be on track to build up [business] and this could be a positive change for them.”
For some, the new grid had some unexpected upside. “There was one advisor, who came from a rival firm five years ago, who said, ‘I have never been through a change where I made more money. I thought it would be a pay cut, and it’s a 2% increase. ’ ” Raymond James & Associates’ new grid applies to those advisors with seven years or more of industry experience. Thus, two of the three new advisors that joined the firm on Friday from Morgan Stanley—Philip T. Maurer, David M. Kushner and Barbara Maurer—will be eligible for it in October.
(The team, M2K Financial, moves to Raymond James with about $146 million in client assets and annual fees and commissions of more than $935,000).
What RJA hasn’t done, says Tasnady, “is to jump on the bandwagon of additional behavior-based awards, i.e., incentive bonuses for targeted growth in assets, number of ultrahigh-net-worth clients, fee-based revenue, etc.”
The company says that type of compensation, though important, doesn’t work with its grid format.
“Raymond James is committed, now more than ever, to a simplified, one-page, transparent compensation grid so, no, we do not pay additional compensation for certain ‘behaviors’—knowing that if our advisors are successful they will be rewarded commensurate with their success,” said Tash Elwyn, head of private client operations for RJA, in a statement.
“We do, however, recognize the value of a number of professional designations and credentials as well as an advisor’s continuing education and development,” Elwyn said. “Those competencies are included in an advisor’s qualification for our recognition clubs, which in turn provide valuable wealth-building benefits.”