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Your Advisor's Compensation Has Increased Dramatically


At a time when more investors are taking charge of their own financial futures and ditching advisors, a survey indicates advisors are actually making more money.

At a time when more investors are taking charge of their own financial futures and ditching advisors, a survey from WealthMangement.com indicates advisors are actually making more money. Last year, advisor income increased by 16.5%, according to the survey. At the same time, the annual inflation rate in the United States was less than 2%.

These figures were culled from 802 advisors surveyed in April 2014 about their 2013 incomes. The participants were from a wide range of practices including wire-houses, national brokerages, regional brokerages, independent broker/dealers, independent Registered Investment Advisors, bank brokerages, and insurance companies.

Obviously one reason for this dramatic increase in pay for advisors is that, typically, they take a percentage of assets. Since the S&P increased nearly 30% in 2013, the advisors’ pay hike is reflective of that.

At a time when few are making substantially more money than the year before, a new survey shows that the income of financial advisors increased 16.5% in 2013.

There is an additional interesting observation made by WealthManagement.com. Advisors who worked in teams made more than solo practitioners. They brought home $253,636 compared to $247,840 for those that practiced alone. These sums included fees, commissions, deferred compensation, and bonuses. The difference in income between the 2 was believed, in part, to be due to the fact that team advisors manage more in assets—$195.4 million compared to $78.3 million for solo practitioners.

When I was relatively new in the investment area, I worked with a person who made $300,000 per year—an impressive number, I thought. But what was even more striking was how he earned it. He only had one major client. The client had $300 million under management with this advisor. Since the latter charged 1% per year, his income was $300,000.

At a time when physician incomes are going down, in some cases dramatically, this upbeat story about advisors becoming wealthier is startling for doctors. It shouldn’t be, though. Because the stock market went up, both clients and advisors benefited. However, when it goes down, the advisors will be keeping their income from the run-up. Clients will be losing their paper gains.

For those who are sufficiently concerned to take action to keep more of their hard-earned money through managing it themselves rather than paying an advisor, there are ways to reverse this trend.

For more regarding this, please see:

Do Investors Act in Their Own Best Interest?

Make More Money as a Self-Investor

Taking Control of Your Finances

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice