Financial advisors working in banks and credit unions are likely to be paid on the basis of their production over the past six or 12 months, marking a dramatic shift in how advisors are compensated, according to data from Kehrer Saltzman & Associates.
Only about one in four advisors (24%) are paid based on their production in the current month, down from 58% who were paid that way in 1997, the study found.
Today almost half of advisors (48%) are compensated based on their average production over the previous six months (24%) or the previous year (24%), payout structures that were not used in 1997, according to the firm's recent survey of compensation practices.
"In 1997 no credit union or bank reported using a trailing average of production to compute advisor pay. This change to a rolling average has reduced some of the volatility common in compensation plans that tied payout to each individual month's production," Kenneth Kehrer, a principal of Kehrer Saltzman & Associates, said in a statement.
In 2012, advisors earned average payouts on annual production that ranged from 20% to 41%. Advisors producing $120,000 in revenue had an average payout of 20%, while those producing more than $2 million had an average payout of 41%.
In 2012, advisors produced $342 million in gross dealer concessions, or revenue from the sale of securities, mutual funds, insurance and other products. That's up from $317 million in 2011 and $300 million in 2010, but down from $352 million in both 2007 and 2008.
The survey covered 40% of all advisors working in credit unions and banks, according to Kehrer.