2021 COMP: RBC Restores Small-Account Penalty
RBC Wealth Management-U.S. has restored its zero-payout policy on customer accounts with less than $100,000, according to firm sources.
The Royal Bank of Canada wealth unit suspended the penalty that was part of its 2020 compensation plan in March, when client account balances skidded along with the market in the early days of the Covid-19 pandemic. After the initial shock, stocks have roared back.
The plan, including the core ‘grid’ that pays brokers between 20% and 50% of the fees and commissions they generate, is otherwise largely unchanged from 2020, according to the sources.
A firm spokeswoman declined to confirm details of the 2021 compensation plan.
The Minneapolis-based firm’s effort to focus brokers on wealthier customers is not unique. Morgan Stanley and UBS have for years put haircuts on small accounts, and Merrill Lynch generally pays zero on accounts under $250,000.
The penalties irritate brokers with less affluent customers, and has motivated some to leave for firms that do not penalize small-household accounts.
Wells Fargo Advisors’ 2020 comp plan initially lowered payouts on accounts under $250,000 to 20%, a penalty previously imposed on accounts under $100,000. (Wells generally lets advisors keep 50% of revenue generated once monthly hurdles are reached).
Like RBC Wealth Management-U.S., Wells modified its small-account policy in April to accommodate the Covid-19 economy.
A Wells Advisors spokeswoman, who previously confirmed the modification would be in effect through the end of 2020, declined to comment on how small accounts will be treated in the 2021 comp plan.
RBC, meantime, is joining some of its competitors in restoring a benefit that had been sidelined by the social-distancing constrictions of Covid-19.
As of January 1, it will allow qualifying brokers to be reimbursed for business development account expenses that are funded through pretax deductions from monthly compensation.
The expense account program was suspended midyear when brokers realized that they were not entertaining enough clients because of the virus to extinguish their account balances. Under Internal Revenue Service rules, expense account funds that are not used within the grant year are forfeited.
UBS Wealth Management USA suspended its expense account perquisite in June, and Morgan Stanley in May gave advisors the option to opt out of funding the accounts.
The benefit is offered at most firms as a recognition-club bonus to top producers.