2020 Comp: RBC Penalizes Sub-$550K Brokers, Pays Zero on ‘Small’ Accounts
RBC Wealth Management is raising the bar for brokers who generate $550,000 or less of annual fees and commissions, and is penalizing those who service sub-$100,000 accounts and who discount commissions.
Bucking recent trends in which brokerage firms have been loathe to fiddle with the percentage payouts paid to advisors, the Minneapolis-based Royal Bank of Canada affiliate has raised the revenue and productivity bonus breakpoints for its lower-tier advisors in its fiscal 2020 compensation plan that is effective on November 1.
Brokers in the bottom eight tiers of RBC’s 15-tier payout “grid” are affected by new minimums, according to the plan reviewed by AdvisorHub. To earn a 43% monthly payout, for example, brokers must have generated $550,000 over the previous 12 months, up from $500,000 in this year’s plan.
Lower-end brokers who currently qualify for a 25% payout once their “trailing-12” hits $210,000 must now reach $225,000 or remain mired at a 20% level.
The bogey for achieving a productivity bonus that can add another 1.5% to 6% of payout also has been raised. Advisors must produce at least $550,000, up from $500,000 in the 2019 plan, to qualify. RBC promotes the bonus to recruits as a 401(k)-like match since it is deposited into a deferred compensation plan (with additional multipliers rewarding longevity with the firm).
“The company continues to revise compensation plans, targeting smaller producers,” said a veteran broker affected by the changes who spoke on condition of anonymity. “It appears they want to drive out smaller producers while aggressively recruiting mega-producers.”
RBC makes no bones about wanting sub-performing veterans to up their game or move onto teams where they can earn a payout at the level of the most productive broker while the firm gets a better chance at retaining their clients when they retire, said an RBC branch manager. The manager, who spoke on condition of anonymity, said the firm had not prepared brokers to expect major changes in the new plan.
An RBC spokeswoman declined to comment on the changes because the plan is “proprietary,” but an official said the firm does not force anyone onto a team and has a practice management group to help coach advisors.
RBC is continuing to offer payouts of 44% to 50% to brokers in its top seven grid tiers, with breakpoints that remain unchanged in the 2020 plan. (It has a more lenient grid for advisors with five years or less of brokerage industry experience and a more punitive one for those entering their 15th year who are producing under $400,000.)
RBC also is intensifying efforts to wean brokers from servicing household accounts with balances below $100,000 for three consecutive months. It will no longer pay advisors on the accounts, after reducing payout to 10% on the accounts last November. (Merrill Lynch has not paid brokers on sub-$250,000 accounts for years, and Morgan Stanley and UBS have similar policies at lower levels.)
In a parallel effort that is also widespread in the industry to dissuade brokers from working on small orders, RBC is eliminating payout on stock trades charging commissions below $94.99, up from around $80 in the current plan. (Advisors must charge $400 to rate a full grid payout.) Options and bond trades have similar penalties, with exceptions for mutual funds, syndicate transactions, annuities, and some other products that are often sold by high-producing advisors.
RBC, which in recent months has aggressively courted big producers from competitors such as UBS and Merrill Lynch, is also furthering a longstanding industry trend of penalizing brokers who give customers discounts from published prices of $95 to $399 on stock trades and on options trades with sticker prices of $75 to $400.
The new plan is “aimed at guys who aren’t breaking 550, and it’s even more dramatic at 500,” said the manager. The average RBC broker produces about $900,000, he said. That level continues to carry a payout of 45% in the 2020 plan.