Editor’s note: ‘Rainmaking’ advisers: a dying breed?
How we weigh up the value of advisers’ skills could be changing
It’s a lovely feeling to be the bearer of good news as you all return from a well-earned summer break: the average pay packet for a financial adviser was up significantly last year and is now nudging six figures.
Even by the standards of other professional services firms, that’s a pretty sweet deal – particularly for a career that involves helping people lead better lives more explicitly than something like corporate law.
The upward trend has been observed in the flagship survey Money Marketing has conducted with recruitment consultants BWD for the past six years. Our cover story this week analyses the results.
But for me the most interesting trend isn’t that overall pay packets are on the rise again; it’s that the shape of advisers’ bonuses is changing. The way performance pay works for financial planners is crucial because it still accounts for around 30 per cent of overall remuneration, but also because getting the structure right is vital if we want to make sure advisers are incentivised to build on the best of modern financial planning practice.
The research suggests that far more firms are now apportioning performance pay on a discretionary basis, rather than linking it to hitting targets or key performance indicators – which traditionally had strong links to revenue generated or assets bought into the firm.
Advisers are already telling me that they have less time than ever to see clients. Should we be incentivising them to spend even more hours bringing in business? This would leave less time for proper financial planning – it’s simple maths.
Adviser soft skills have become increasingly important in the post-RDR world, yes, but planners also need time to get to grips with an ever-changing technical landscape as tax and product changes have rushed ahead. Can they do that if their main financial incentive is adding to the firm’s client bank, rather than developing themselves as professionals?
If advisers are truly a different breed from salesmen now, should any part of a bonus structure be linked to assets under management? After all, assets and growth may have only an incidental relationship with the quality and execution of the client’s financial plan. And does being rewarded for expanding one’s client bank ad infinitum take away from delivering the kind of in-depth, holistic, personal service that has become the hallmark of a post-RDR profession?
These are major questions that advisers – and eventually clients – may have to face up to.