Like many large Wall Street broker/dealers before it, RBC is sending a message to its retail financial advisors who are generating below average revenue: Get your numbers up, or take a walk. In its 2011 compensation plan, which was rolled out last week and took effect Monday, the firm chopped the payout of those who have been in the business five years or more and do between $175,000 and $300,000 in annual revenue.

RBC advisors who do $200,000 to $225,000 in annual revenue now have a 25 percent payout, down from 34 percent. Those who do $225,000 to $250,000 have a 28 percent payout, also down from 34 percent. And those who do $250,000 to $300,000 now earn payouts of 34 percent, down from 37 percent, said Tom Sagissor, RBC’s regional director for the North and chairman of the compensation committee.

“They’re slowly rolling up the bottom a little bit. They’re making it harder for low-producing broker to stay,” says one RBC advisor who will not be affected by the change. He adds, “At those levels you pretty much are out the door. You’ve got to go somewhere else, or find another job.”

The RBC advisor, who spoke on the condition that his name not be printed, generates $350,000 in annual revenue. His 39 percent payout nets him 18 cents on the dollar, he says, which means a guy getting a 25 percent payout could be getting around 9 cents on the dollar, and that kind of wage makes it very hard to survive in the business. (For those advisors doing $300,000 to $350,000 revenue, the 2011 payout is unchanged at 39 percent. For advisors doing $350,000 to $400,000, the payout is 42 percent, also unchanged.)

More For Less

The payout changes are part of a larger firm-wide strategy to double productivity over the next five years, says Sagissor. To that end, RBC rolled out a series of free practice management programs at the start of 2010. Consultants were divvied up into three teams, each working with a different group of advisors according to the amount of revenue they generate. The firm’s Top Gun program is aimed at advisors doing $1 million or more; the Jump Start program is for those doing $500,000 to $1 million; FC Forward is for those doing $500,000 or less.

“In 2010, our goal was to give support and resources to all of our financial consultants no matter where they fell in terms of our segmentation,” Sagissor says. Some advisors have really taken advantage of the programs. The 400 financial consultants who participated in FC Forward, for example, showed a 15 percent growth rate, versus 11 percent growth for the top 1,500 financial consultants, said Sagissor.

Not everybody wanted to grow, or could, however. “For those FCs, when they get to that point in their career when they’re not interested in growing their business or using the resources we’re offering, then it’s sometimes we’re not the right firm and they’ve left,” says Sagissor. Attrition among those producing under $300,000 has remained in the 4 percent to 5 percent range over the past three years, says RBC. But presumably, now that the lower payouts have taken effect, that number could rise.

Recruiters are not surprised by RBC’s move to cut payouts on the low end and increase productivity. “For the last seven to eight years, it’s been a stated goal that they wanted higher quality advisors with larger books of business,” says one recruiter who works with the firm. “So the fact that they’ve made it uncomfortable for these guys to be there doesn’t surprise me. Some of the best advisors on Wall Street who are in play are moving and RBC is winning those deals.”

But some speculate, too, that the parent company is anxious to fatten profits on its U.S. wealth management business because it spent so much on a steady diet of acquisitions over the past several years. The Royal Bank of Canada bought Dain in 2000. Then in 2006, RBC bought Flag Financial Corporation of Atlanta, Carlin Financial Group of New York, Daniels & Co. of Denver and American Guaranty & Trust of Wilmington, Del. In March, 2007, the firm bought Parsippany, N.J.-based J.B. Hanauer. And in early 2008 RBC bought Ferris, Baker, Watts, a full-service b/d in Washington D.C. Earlier this year, RBC sold off some offices that were part of the Ferris, Baker, Watts acquisition. The firm also closed several smaller branches in the middle of 2009, including some from the Ferris deal.

In 2008, RBC Dain Rauscher merged with RBC Capital Markets to form a single U.S. broker/dealer, and the U.S. broker/dealer rebranded to RBC Wealth Management, which has around 2,400 advisors in the U.S. RBC also has a clearing firm for other b/ds called RBC Correspondent Services and a custody division called RBC Advisor Services, with 200 affiliated RIA firms and $11 billion in client assets.