Asset Gathering Quotas For Advisors

You may not be aware that some financial advisors have asset gathering or commission quotas (not all do, it depends on their firm). For example, new investment advisors at the big bank owned brokerages will typically have asset gathering targets of around $5 million per year (some are higher, but $5 million is roughly the average from what I have seen).

Every firm is different, and some will assist you by providing referrals from the bank branch network – when a client has perhaps outgrown the mutual funds and GICs offered at the “bank branch level” they may get referred up to the brokerage. Others (most) expect you will source the assets entirely on your own.

I don’t know the exact stats, but a large number of advisors do not stay with their first big brokerage firm after the first two years. You see a lot of them crossing the street. That means they switch firms and bring their clients and assets with them as best they can. The new firm may pay them a bonus on assets they bring in, or treat them as rookies again (with a base salary plus reduced commissions). When their new base salary expires, they will probably have more assets under their belt (what they brought with them, plus what they sourced at the new firm). They will keep on switching until the next time their salary runs out they have enough assets to support themselves from commissions alone.

Branch managers have “new hire” and “competitive hire” targets as well. At the end of the day, the brokerage business lines contribute to the bottom line of the overall companies, so what they do is in theory driven by maximizing shareholder value – but there is something about this advisor turnover that just seems odd don’t you think?

For those who would argue that those who hit their quotas won’t have any problems and those who don’t hit their targets don’t have what it takes to be financial advisors, I would say that if you replace “financial advisor” with “salesperson” then I couldn’t agree more.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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Showing 3 comments
  • Henry

    I have talked to a broker/financial advisor and he told me that he needed to get 10 million dollars in asset in the first year. He told me that his payout ratio is 40% and he uses 0% front load funds for his clients. He collects a trailer of 1% on most funds. In order to make 60k a year, he has to have 15 million in assets under management and put all of them in 0% front load equity funds.

    I am wondering if the payout ratio is higher in other firms. I am also wondering the brokerage is looking for brokers to put their clients in “low load” version to maximize commissions from mutual funds so that brokerage can give a higher payout ratio.

    Overall, I found this broker/FA to be a great person and I applaud his effort of using 0% front load funds. However, I recommended that he move his clients into ETFs and charge 1% in asset managed.

  • H

    I’m not an expert with the systems, but your friend may not be able to sell ETFs if he’s on the MFDA platform (vs. the IIROC). Kudos to your friend as for going the no load route. Is he able to charge an hourly rate for his services?

  • Henry

    H: He is working at a full service brokerage not a bank branch. He told me that he could sell insurance and stocks. I think Canadians are not used to a fee based system.