There’s currently a lot of buzz in the industry about incentive plans at bank programs. With firms grappling with the DoL, the long-term move to fee-based products, continuing economic pressures and changing adviser demographics, program managers are forced to reevaluate the structure and the real impact—both psychological and economic—of their adviser incentive plans.

Historically, the brokerage industry has relied on transaction-based compensation. Sell something, generate a commission, add up the commissions and apply that to a grid to calculate the adviser’s paycheck for the month. Lower producers might receive as little as 20% to 25%; larger producers 40% to 45%. The fundamental problem with this approach, of course, is the pressure it puts on FAs to “encourage” clients to buy or sell something, placing an inherent conflict of interest at the center of the relationship.

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