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"Do not try too hard, I may pay you too much" - Another Reason Why Gross Sales Compensation Has To Go

by Mike Ma

Later this week, I am meeting with a firm that has done extraordinarily well, so well that they would have had to pay several of their wholesalers over 7 figures at plan.

They didn't pay it. They cite the fact that the wholesalers didn't earn all of it. Surely, they couldn't have raised all that money.

To be honest, we've been saying that for years. However, I don't want to indict them directly, they are not alone. I've heard dozens upon dozens of national sales managers and distribution heads say similar things. Does this sound familiar?

"We are an outcome driven sales organization."
"People eat what they kill."
"Our team needs clear motivation."

Here's the hidden asterisk to all of these -- as long as it falls within an acceptable band (say, $250K-$500K) of compensation.

I think the way out of this is paying on sales activity. We have to deem the actions that we think are valuable, and then pay for their execution. This type of compensation is typically called "discretionary" which I think has been too small, and misnamed. Discretionary sounds optional. I think of it as non-commission variable. Not great, but we are working on it.

And I think that there is more to be gained managerially rather than lost -- we want loyalty from our employees, we want them to be "good soldiers." Then we owe it to them to have a better battle plan. The two prerequisites to making this a bigger part of your game plan are segmentation and metrics.

Think about what this would garner. In a bad year, if you think that you are going to lose 10% of assets due to performance, you could be excited that you only lost 5% with good wholesaling? In a good year, if wholesalers are just riding a performance wave, you could help concentrate that momentum to the advisors that matter most.

A greater slice of the compensation pie is going to be based on valuable, quantifiable metrics such as:

• Team based touches between sales and marketing
• Cross selling advisors to new, more stable, or profitable products
• Cross selling strategies to different product wrappers
• Penetration of new advisors at key firms
• Identification and development of top advisors
• Increasing usage of known loyalty, sales-correlating activities such as the Web

These are just a few things that come to the top of my mind. Two things stand in the way ... the ability to think of new metrics and courage to push this in your sales organization.

I would be up to help anyone in the business that is up for the challenge.