Ad­vi­sor at three big banks are dis­grun­tled over changes to their com­pen­sa­tion.

Sco­tia­bank, Na­tional Bank and CIBC ad­vi­sors were quite vo­cal in their dis­ap­proval of changes to their paycheques

Investment Executive - - FRONT PAGE - BY JENNIFER CHENG

fi­nan­cial ad­vi­sors who work at three of the Big Six banks had much to com­plain about con­cern­ing their pay as a re­sult of re­cent changes to their com­pen­sa­tion pack­ages.

No­tably, ad­vi­sors who work at Toronto-based Bank of Nova Sco­tia, Mon­treal-based Na­tional Bank of Canada and Toron­to­based Cana­dian Im­pe­rial Bank of Com­merce (CIBC) ei­ther gave their firms the low­est or much lower rat­ings in the “firm’s to­tal com­pen­sa­tion” cat­e­gory in this year’s Re­port Card on Banks be­cause of changes that led to dras­tic re­duc­tions in their take-home pay.

Sco­tia­bank re­ceived the low­est rat­ing in the cat­e­gory (6.9) — a tie with Na­tional Bank — be­cause ad­vi­sors are dis­sat­is­fied that Sco­tia­bank elim­i­nated the in­vest­ment bonus from ad­vi­sors’ pay pack­ages.

“[The bank] took away about $16,000 to $18,000 — or 20% of my salary,” says a Sco­tia­bank ad­vi­sor in Bri­tish Columbia.

“They did a lot of re­struc­tur­ing this year,” adds a col­league in On­tario.

The bank re­moved the in­vest­ment bonus to en­cour­age ad­vi­sors to adopt a more “holis­tic” ap­proach, says Alice East­man, se­nior vice pres­i­dent, cus­tomer ex­pe­ri­ence and dis­tri­bu­tion strat­egy, with Sco­tia­bank.

“In the past, [the] bonus pay­out was re­ally fo­cused on the in­vest­ment side of the bal­ance sheet,” she says. “As of this year, [the cri­te­ria for bonuses] looks at ad­vi­sors’ sales, the cus­tomer ex­pe­ri­ence, as well as com­pli­ance-type ac­tiv­i­ties [in­stead]. This was not at all about sav­ing money. This was about in­cent­ing the right be­hav­iour, [so ad­vi­sors will] re­ally be cus­tomer­centric and pro­vide the rel­e­vant so­lu­tion.”

Sim­i­larly, ad­vi­sors with Na­tional Bank took is­sue with sev­eral re­cent tweaks to the firm’s com­pen­sa­tion regime. For starters, the bank an­nounced a new com­pen­sa­tion struc­ture this past Jan­uary, through which ad­vi­sors will take an 8% cut in their salary as of July 1; this did not sit well with many ad­vi­sors sur­veyed.

That may ex­plain why Na­tional Bank’s com­pen­sa­tion rat­ing dropped to 6.9 from 8.0 last year, lead­ing to a tie with Sco­tia­bank for the low­est rat­ing in the cat­e­gory.

“The bank made some changes to our [com­pen­sa­tion] that aren’t very pos­i­tive,” says a Na­tional Bank ad­vi­sor in Que­bec. “They re­duced our salary, they changed the way our vari­able pay is cal­cu­lated and they in­creased our ob- jec­tives, which is go­ing to make earn­ing bonuses harder.”

Adds a col­league in On­tario: “They’ve changed ev­ery­thing, mak­ing it a lit­tle bit harder to achieve tar­gets.”

The new pay­out struc­ture for Na­tional Bank ad­vi­sors is 70% base salary and 30% vari­able com­pen­sa­tion, says Nancy Pa­quet, vice pres­i­dent, part­ner­ships, with Na­tional Bank.

The changes in­clude an 8% re­duc­tion to ad­vi­sors’ salary, as well as changes to how the vari­able por­tion is cal­cu­lated; specif­i­cally, the lat­ter now is paid quar­terly in­stead of an­nu­ally.

“We found that Na­tional Bank was pay­ing [a greater] base [salary] than most of the other [banks]. In the i ndus­try, a lot of [ad­vi­sors] are paid quar­terly. There­fore, we re­vamped our com­pen­sa­tion plan,” Pa­quet says. “We wanted to re­tain and at­tract top per­form­ers in Canada. We also wanted to make sure we made [tar­gets] more ac­ces­si­ble for more [ad­vi­sors].”

To make up for the 8% salary cut, Na­tional Bank in­tro­duced an an­nual bonus to re­ward ad­vi­sors for long-term ser­vice to their clients, Pa­quet ex­plains.


In ad­di­tion, Na­tional Bank in­tro­duced two other new el­e­ments to its vari­able com­pen­sa­tion, she notes: a team bonus (if the ad­vi­sor’s branch hits cer­tain sales tar­gets) and re­stricted shared units (if the ad­vi­sor is among the top 25% per­form­ers for the year), which ad­vi­sors will re­ceive with their fi­nal quar­terly pay­ment for the year.

“In terms of the vari­able com­pen­sa­tion, it looks clear, but it’s unattain­able,” says a Na­tional Bank ad­vi­sor in On­tario.

How­ever, Pa­quet says, “It’s ac­tu­ally go­ing to be eas­ier for more [ad­vi­sors] to per­form. We don’t want just our top [per­form­ers] to feel that they are per­form­ing. We want more of our [ad­vi­sors with] the right be­hav­iour to have a sense that they suc­ceeded. [Now], they are com­pen­sated if they stay with their clients, which is what we want be­cause clients want to grow with their ad­vi­sors; they don’t want to re­peat their story [to a new ad­vi­sor] every five years.”

Mean­while, CIBC re­ceived a com­pen­sa­tion rat­ing of 8.4, good for sec­ond-high­est in the cat­e­gory, al­beit down sub­stan­tially from 9.1 last year. That’s be­cause CIBC ad­vi­sors ex­pressed dis­ap­point­ment with changes to their pay in­tro­duced this past Novem­ber.

Specif­i­cally, CIBC ad­vi­sors now must sell a min­i­mum amount of credit and in­vest­ment prod­ucts to re­ceive a bonus.

“Prior to this new com­po­nent, we just had to meet a min­i­mum over­all net sales,” says a CIBC ad­vi­sor in Al­berta. “Now, there’s an in­vest­ment bucket and a credit bucket.”

But while there now are two com­po­nents to the bonus struc­ture, the bank has not in­creased the an­nual thresh­olds ad­vi­sors must meet to earn this bonus, says Scott Wam­bolt, se­nior vice pres­i­dent, na­tional sales and ser­vice, with CIBC.

“It’s a very min­i­mal amount of credit prod­ucts that [ad­vi­sors] have to sell,” he ex­plains. “And we make a num­ber of re­sources avail­able to help them. There should not be an ad­vi­sor in the coun­try who strug­gles with this.”

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