Paying your financial advisors is crucial to keep reps on board, happy and productive. If you don’t pay your advisors, some of your best might just leave you. Yet compensation management is still one of the biggest back-office pain points for independent broker-dealers (IBDs). What is the source of this pain, and what can be done about it?
The reasons why many IBDs struggle with advisor compensation week after week, month after month, may vary a bit from firm to firm. But there’s one common thread we’ve seen over the years: disparate, low-quality data combined with outdated technology from the 90s.
Here are three ways IBDs can turn advisor payouts from a nightmare to an advantage.
1. Consolidating Clean Data
When Sycamore Company opened its doors over 10 years ago, the first back-office capability we launched was advisor compensation management with clean, normalized data at the core. One of our first clients was a large broker-dealer who was looking to streamline advisor commissions and payouts and was managing more than 60 different databases throughout the firm.
That’s when we realized that we were not only a back-office platform provider; we were also a data management expert. Within 18 months, we had all data from the firm’s 60+ databases scrubbed, cleansed and normalized into one consolidated platform, accessible to all the firm’s operations workflows in addition to advisor comp.
As time goes on, we get better and better at it. Today, we can load data even faster, using a bulk loader that takes minutes rather than hours, and prevents missed or duplicated files.
2. Having an End-to-End Compensation Process
We hear “end to end” all the time. But what does it truly mean?
To us, it means the process is actually smarter than you, and there are no gaps in the process where mistakes can happen. It means there’s no need to spend hours doing manual, menial tasks – it’s all automated and streamlined using clean back-office data.
In the past, firms had to spend hours per day to manually check if payouts were in or out of balance. A truly end-to-end process automates those checks and notifies users if something is out of balance via a smart, real-time dashboard. Imagine waking up in the morning, seeing if everything is good to go on your dashboard, or being able to fix an error immediately with one or two clicks regardless of where the issue resides – at the client, account, holding or advisor level.
3. Applying Analytics and Connected Workflows
When you have clean, centralized data and a streamlined compensation process, what else could you possibly want? Analytics and connected operational workflows.
Many of our clients connect their commissions and compensation process with their compliance reporting, advisor supervision, and trade surveillance workflows. The chief financial officer or executive team may want to run a report of next month’s anticipated payouts based on historic and current data. Or, the compliance officer may want to dip deeper into unusual payout trends specific to an advisor or a holding.
When you have the data within an integrated, cloud-based platform plus the ability to tie together clients, advisors, accounts, holdings, and a host of other data, there really is nothing you cannot accomplish in your back-office operations.
Compensation Efficiency Is Crucial – and Visible
When compensation payouts go wrong, everyone within the organization knows it. Quite possibly, your partners and clients on the outside might know it too, especially if your commissions are connected to your fee billing process. But when data is clean and consolidated, and checks and balances are automated, firms can avoid making the same errors over and over again. The commission cycle is complete and closed out within 24 hours, not in days or an entire week. That’s a good thing for advisors, and for firms looking to retain their best producers.