Wirehouse brokers make more than bank brokers, both for themselves and others. New Jersey-based research consultant Kenneth Kehrer quantifies and examines the discrepancy every year. In a recent study, he discovered that, in average compensation, wirehouse brokers outdid their banking peers, earning almost $82,000 more in 1999.

The typical retail non-bank broker-dealer produced gross commissions of $455,004, outstripping bank counterparts by 86 percent, raising obvious questions about the state of affairs with bank-based brokers.

"The productivity gap was a whopping $210,356 in 1999," said Kehrer at the Roundtable Discussion at the 14th Annual Convention of the Bank Securities Association. "...[t]he productivity gap has grown at an annual rate of 18 percent over the six years [since 1993]."

One reason is that many banks are structured to prevent brokers from selling products to their wealthiest customers, reserving this segment of business for the trust branch. At wirehouses, trust officers work for the brokers, stepping into the money flow only when the client requires trust services.

"Non-bank securities firms tend to be more aggressive in cutting off or terminating brokers that aren't producing enough," said Kehrer, explaining another factor that produces this differential.

Kehrer indicated that the growth in the compensation gap has slowed in recent years, but danger lies in the different structures of the two types of jobs. Bank brokers who are producers are fresh meat for wirehouse recruiters, so they can pluck away the cream of the crop. Kehrer warned that banks face severe challenges in preventing brokers from moving to the wirehouses.

 

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