Will Financial Services companies be looking beyond sales production to determine how incentives are awarded to agents and brokers? According to some industry executives, they already are.

A recent article in The Wall Street Journal reported that certain companies have begun to consider ethical behavior as qualification criteria. For example, an executive from Smith Barney was quoted as stating that the firm takes into account whether a producer has received customer complaints or has been sanctioned by the NASD when determining whether he or she is eligible for incentive travel programs.

The question was also discussed by a panel of financial services executives at the Securities Industry Association's (now the Securities Industry and Financial Markets Association) Sales and Marketing Conference in New York last fall. Richard Franchella, senior managing director at RBC Dain Rauscher in New York, chaired the October panel, which also included representatives from Merrill Lynch & Co. and Smith Barney. Franchella says that some financial services companies are looking at different incentive-reward models and that “subtle” changes could be in store over the next several years. “Are current compensation models rewarding the right kind of behaviors?” he asks. “For example, should [incentive] trips be based just on production, or should [brokers and agents] be rewarded for other things as well, such as their performance numbers on behalf of their clients?”

Incentive programs, Franchella believes, should recognize producers not just for their sales efforts, but also for meeting their clients' needs and objectives.

Boondoggles No More

Franchella — a former director of sales — points out that there has already been a shift in the content of incentive programs. He says that back in the 1980s, most incentive trips were about having a good time. “They were boondoggles,” he admits. “But they're not boondoggles now.” Although producers may meet in luxury properties and nice locations, today's programs are about much more than fun and sun, he says. “Look at a typical agenda. They're chock-full of educational sessions. There has been a real sea change regarding these trips.”

While Franchella says that financial services companies have done a good job of restructuring the nature of incentive travel, the new question is: “Whom do we [qualify] to go on these trips, and how do we pick them?” This question is particularly relevant for an industry whose business practices are under continual public and regulatory scrutiny.