From the outset of this series, it was made clear that the purpose of delving into the commission grid was not to simply provide ammunition with which to chastise the industry, but rather to provide the consumer with insight to the particular conflict of interests in the financial services as it stands today.
Remember, most industries are subject to conflicts of interest. This does not mean that every member of every industry cannot rise above apparent conflicts. There are many trustworthy financial advisers working in each model of remuneration that provide outstanding value and transparency to their clients. Unfortunately, there are also a handful of advisers that do not.
From the outside looking in, it would seem that all financial advisers walk and talk the same. Of course, now we know that in reality there are vast differences behind the scenes. Sales quotas, product offering availability, compensation models and more are all factors that every adviser grapples with at some point in their career.
Sometimes an adviser chooses to work under a certain firm because of the firm’s reputation, ability to provide research, or other resources made available to the adviser.
In other cases, the compensation model is a larger factor. Every adviser is different, but they all have their reasons for being where they are.
The commission grids at the big bank brokerages are clearly designed to modify behaviour, so it is here that a client needs to be most aware of the conflicts. There are incentives for the adviser to gather assets, increase the amount of commissions per client, and in some cases, incentives to generate additional transactions towards the end of the commission year. These multi-dimensional grids (payouts based on a combination of gross annual production and individual transaction commissions) exist to a lesser extent with non-bank owned brokerages as well.
Flat grids and 100% payout grids still incentivize the gathering of assets, but with much less behaviour modification exerting effects of the more complex grids structures. The product and service offering also differs from the big banks in most cases.
In the end, good financial advisers will be happy to discuss their compensation details with you. A far greater determinant of a good relationship with a financial adviser is not how or what they are paid, but rather, the candour they provide to you about it.