Findings from the Kehrer Group Survey of Compensation of Directors of Bank-Based Advisors
The incentive structure for compensation of directors of investment services in financial institutions appears to reward revenue growth – two-thirds of the 55 compensation plans we reviewed either based bonuses only on basis points on production, or a combination of revenue and other Key Performance Indicators. But the actual compensation of these directors has no relationship to how their businesses performed. That is one of the key insights from our analysis of the Kehrer Group Survey of Director Compensation, published this November.
When we take into account all the factors that influence total cash compensation of directors – their experience and tenure, registrations and certifications, and measures of the size of their responsibilities – how well their businesses performed is not reflected in how much they are paid. Measures of size – number of advisors managed, the number of branches in the bank or credit union, and whether the director manages one or more sales managers instead of managing advisors directly – explain most of the differences in how directors are compensated.
But gross revenue above what would be expected for the size of the institution or the firm has no impact on the director’s compensation. Neither do other measures of the performance of the firm – customer penetration, profitability, advisor coverage, size of advisor books, etc.
For compensation of directors of investment services in banks and credit unions, size matters. Business performance —not so much.
About The Kehrer Group Director Compensation Study
In response to many requests from the bank and credit union financial advice community, Kehrer Group conducted a survey of the compensation of the executives who manage the investment services business in their institutions. A total of 55 executives participated. They were asked to provide their compensation plan, their actual compensation for 2023, and details about their span of control, tenure, industry experience, professional designations, and more.
The titles of the positions covered varied widely, including CEO, President, Director of Wealth Management, and Program Manager. The job description included management of the advisor force directly, or through management of one or more sales managers, oversight of operations and compliance, and P&L responsibility to the institution.
We then matched the participating executives against data about their businesses and institutions from the 2023-2024 Kehrer Group Annual Benchmarking Survey. The resulting dataset supported sophisticated statistical analysis to understand the key drivers of compensation for the director role.
The study is available for $1,000 for firms with less than 25 advisors and for $2,000 for larger firms. Participants receive the study with a 50% discount. For further information and to purchase the study, contact tim@kehrergroup.com