The big financial institutions are losing their edge on compensation as independent firms and broker-dealers gain parity with their broker counterparts. This could change the current dynamic of elite reps jumping ship to other wirehouses instead of going independent. Outside of signing bonuses designed to incentivize brokers to move, the approach to more level pay structures between the two sides of the industry could indicate a tipping point toward independence.
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In a significant drop from the $1.98 million wirehouse brokers were paid from the late 90s to 2003, compensation has now migrated to around $900,000. One firm who specializes in facilitating the break to independence expects wirehouse compensation levels to drop even further to the $850,000 mark. At the same time, independent advisors are projected to bring in around $875,000 in 2012.
The research conducted
includes 60 brokers earning revenues of around $2 million and 25 elite registered independent advisors managing $500,000 or more in assets. Most of the wirehouse advisors garner revenues off of commissions from stock and bond trades, structured products, and other investment vehicles. The independent advisors’ revenues were primarily from investment consulting.
The research also included dually registered advisors who primarily bring in revenues from investment consulting but who do also advise on insurance, stocks, and bonds. The longer advisors have been independent, the more their focus has shifted to asset allocation issues and away from product sales. With compensation shifting the way it seems to be, there may be hope that the broader industry focus will conglomerately shift toward areas that are more client-centric.