What Production History is Used to Compute Advisor Compensation?

Multiple Month Advisor Compensation Plans Outnumber Single Month Plans by More Than Two to One

According to new Kehrer Bielan research, Advisor incentive plans that calculate payout based on a rolling month production average account for almost seven in ten plans.  Even though monthly plans are the most common type of look-back used, the ability to smooth out grid placement through averaging multiple month occurrences are more common when not distinguishing the number of months used.

As firms look to reduce exposure due to risk of business written at production month-end, and moderate compensation cost volatility to better predict a firm's net income, and as Advisors increase their desire to earn incentives based on their cumulative contribution, we see more and more firms turning to multiple month plans.


Within the multiple month plans, usage is fairly evenly split among year-to-date progressive, rolling twelve-month, and rolling six-month look-backs, reflecting a greater desire to reduce the volatility by reducing any single month's influence more than an indication of which look-back calculation is best.

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