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Gross Sales Compensation Is Looking Gross This Year

by Mike Ma

In the last few weeks, I have been working with a number of firms who have had to make adjustments to their compensation plans. Some have had to pay people a bit more than their gross sales merit, and some significantly less.

The national sales managers are sharing some of their frustration with gross compensation.

We understand, we've been saying that for years, but I understand the allure of a gross model -- we want people to have clear motivation and purpose.

The dilemma is that we most are trying to keep wholesaler compensation in acceptable band (say, $250K-$500K) of compensation. I understand this as there are financial, but more importantly cultural implications by defying this band too often and by too much.

I think the way out of this dilemma is paying more 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.