How to Increase Advisor Headcount Without Squeezing Profit Margins
Many financial institutions want to increase the fee income produced by their investment services businesses. But most are reluctant to reinvest some of the current fee income to achieve that growth. The most straightforward path to increasing investment services revenue is to add advisors. While adding advisors increases revenue, the profit margin on new advisor production is usually less than the net income contribution of established advisors, because new advisors are paid a higher share of the revenue they produce while they are ramping up their practices. Moreover, firms often “make room” for the new advisors in the branches by promoting some advisors to second story positions, which usually includes higher payouts. Since advisor compensation typically consumes the lion’s share of the firm’s revenue, higher advisor payouts mean lower profit margins.
Drawing on proprietary data on the compensation and productivity of different advisor roles, Kehrer Group has been modeling how a firm can add advisors without squeezing profit margins by balancing the headcount of the different advisor roles in the firm, and timing hires and promotions to maintain the target firm-wide effective payout. Come see our progress at a concurrent breakout session next week at the BISA Conference:
“Self-Funding Growth: Balancing Advisor Force Roles to Maintain Profit Margin as You Add Advisors”
Featuring: Tim Kehrer, Angelo Pietri, and Frank Van Wert
Tuesday, March 3, 1:45pm-2:30pm ET
About Kehrer Group
Kehrer Group is the bank and credit union financial advice community’s trusted partner for original thought leadership, insight based on data, and strategies that drive success. Kehrer Group’s legacy of research and analysis has advanced the delivery of investment services in banks and credit unions and shaped the industry into what it is today. Kehrer Group’s principals meld the wisdom gained from its long history in the industry with cutting-edge analytics, data that is robust and diverse, and a deep understanding of the key drivers of performance.
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