How Much Are Referrals Worth to an Advisor?

Highlights from the 2018 Advisor Compensation Study

Over the past few years firms have felt the impact of an ever-increasing market demand for high performing Financial Advisors. The changing behavior to greater advisory revenue has created an increased emphasis on Advisors who can consistently produce in this environment, and firms now more than ever are changing their compensation outlook to attract these types of employees. While many disruptive types of Special Incentives are being introduced to attract new employees, one of the main determinants in gaining Advisors remains the value of the internal referral network.


A closer look at the production ranges of most Advisors better illustrates the implied value of referrals to a firm, as there is up to a 7% difference between the Independent and Internal Advisors in this range. This is an increase from a historical gap of 5%. Access to a firm’s referral network is valuable enough for Internal Advisors to overlook this pay discrepancy as they remain willing to work in comparable roles for lower payouts at increasingly higher production levels. This referral network value can save a firm up to 7% in commission costs and should be directly additive to profit. While Wire-houses pay slightly less for Advisors than those in Independent roles, deferred and special incentives serve to bring their true payout to comparable levels.

This glimpse into the compensation structure of Advisors in comparable roles highlights the value of the referral network. With comprehensive data from 50+ leading Financial Advisory institutions, the Kehrer Bielan 2018 Advisor Compensation Report provides an in-depth look at some of the most relevant compensation patterns emerging in the market today. Covering fundamental compensation factors such as Salary Composition, Plan Classification, Incentive Type & Structure, and Retention Tools, the 2018 Advisor Compensation Report provides an understanding of market conditions that cannot be found anywhere else.

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