The greater the number of compensation grid levels, the more productive advisors will be.

That's one of the major takeaways of a recent study Kehrer Bielan Research & Consulting conducted on compensation practices in credit unions.

The study found that credit unions with relatively more grid levels had substantially higher advisor productivity.  Advisors in credit unions with seven or more grid levels, for example, produced an average of $398,862 in annual gross revenue, 21% more than advisors at credit unions with less than seven grid levels.

"A major reason for increasing the number of grid levels is to encourage advisors to work harder to get to the next payout level. If there are more grid levels, less additional production is required to get to the next level," the report explains. "With few grid levels, the next threshold might seem to be too high to attain."

According to the report, credit unions tend to offer fewer grid levels than banks. Advisors in a typical credit union have a payout grid with seven levels, while those in a bank have nine. 

In addition to adding more "step-ups," credit unions that want to bump up advisor productivity should pay attention to the threshold at which comp plans pay out 40% of revenue. According to the report, advisors in credit unions with 40% payouts at annual production of $500,000 or less tend to produce more than advisors who have to reach a higher threshold d to achieve that same payout. Those with 40% payouts at or below $500,000 in production averaged $388,424 in annual gross revenue, an 11% advantage over advisors in credit unions where production has to exceed half a million to obtain a 40% payout.

Credit unions aiming to boost advisor productivity should also consider designing a comp plan with a draw instead of a base salary.  Advisors who receive a base salary produce an average of $318,503 in annual gross revenue, while those who are offered a recoverable draw produce $358,606, or 11% more, according to the research. 

The study, titled "Effective Financial Advisor Compensation in Credit Unions," draws on data from advisor compensation plans from 35 banks and 34 credit unions. It was commissioned by CUNA Brokerage Services, a broker dealer serving credit unions and their members.

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