Wirehouse compensation plans have become too complex, change too often, and are now one of the key reasons brokers make the transition to independent broker-dealers and registered investment advisors, according to a Cerulli Associates survey on advisor compensation.

The survey determined that as wirehouses use their compensation plans to  achieve the firm’s objectives and increase advisor productivity, the changes can be hard for brokers to navigate and as result 62% said their plans are too complex and 47% said the plans change too often.

In general, wirehouses make some changes on annual basis, and major overhauls every two to three years, said Marina Shtyrkov, associate director of wealth management at the Boston-based consultant and a specialist in retail financial advisor trends across affiliation models.

“These compensation plans are potentially hundreds of pages,” she said. “And the advisors themselves have a difficult time understanding how they get paid, what they get paid on and how to increase their income.”

This led 45% of advisors who left a broker-dealer in the past three years to say it was the primary reason why they switched firms or transitioned to the independent channels, where they can have greater control over their revenue, the survey found.

The most common set of components includes a payout percent on the production that the advisor brings in and bonus opportunities, which can vary by product, firm and by the attributes of the advisor, and growth incentives for bringing in new clients and net new assets.

“And it’s very hard to compare two different firms,” Shtyrkov said. “This is where recruiters come in, to help make those comparisons.”

Meanwhile, the transparency of how an advisor makes money on the independent RIA side continues to be a draw. According to the survey, the median compensation is $278,000, and on average 65% of RIA compensation comes from a base salary and equity-based profit distributions. The remining 35% comes from bonuses based on total revenue and/or assets under management, the survey found.

“Compensation can be a very powerful behavior modification tool. A lot of advisors are motivated by compensation,” Shtyrkov said. “But I think the wirehouses know the plan structure can be a pain point for their advisors. And it’s definitely increasing movement of advisors within broker-dealer channels and independents. We’ve seen a continuous stream of advisors not just switch firms but gain independence, flexibility and control over their practice.”

Since growth in client rosters and AUM is one way for advisors anywhere to increase income, advisors understandably chafe at anything that restricts their ability to acquire clients, including account size minimums. Among millennial broker-dealer advisors, defined by the survey as between 26 and 41, 30% said account size minimums had limited their business development opportunities.

“The challenge with account size minimums is that they can be limiting to a multi-generational strategy, where advisors who are looking to work with the next generation of investors, often the children of clients who typically have fewer assets but are important to long-term retention, are prevented from doing so,” Shtyrkov said.

However, she continued, there’s also a tendency when advisors are first building a practice that they’ll try to rope in all the family, friends and network that they can to get initial momentum. As the practice grows and evolves, those people may no longer fit the advisor’s target market.

“What do they do with that relationship?” she said. “It’s difficult to move that client to another advisor on the team, but those smaller accounts end up holding them back.”