By Mike Overdorf, President and Founder, The Sycamore Company
Compensation data is a critical but often underutilized asset among broker-dealers. Effectively leveraging compensation data – everything from base salaries and bonuses to equity-based incentives and other benefits – can help optimize a broker-dealer’s performance, strengthen their position in the market, improve client satisfaction and more.
However, not all compensation data is created equal. To reap the benefits, the data must be complete, accurate, organized and thoroughly analyzed. And the data itself is just the beginning.
Here’s a look at how broker-dealers can make the most of compensation data.
Leverage Advanced Analytics
High-quality data analytics are needed to take full advantage of compensation data. This means collecting, processing, analyzing and interpreting data in a way that leads to accurate, reliable and actionable insights.
The right compensation management technology can provide advanced analytics and a way for broker-dealers to streamline complex compensation structures, ensure accurate and timely payouts, improve transparency, align incentives with business goals and maintain compliance.
With the right tech, broker-dealers can also integrate commission data with custodial data, which enhances revenue analysis and reduces errors.
Foster a Data-Driven Culture
Don’t just leverage technology. Establish a process for collecting comprehensive, accurate compensation data, then take it a step further and make data part of your firm’s culture.
To weave data into the fabric of decision-making processes and day-to-day operations, leadership must get on board and lead by example, championing data-driven decision-making and promoting the importance of data throughout the organization.
It’s also imperative that the organization makes data accessible to everyone who can benefit from it and provides training on data literacy and how employees can leverage data to improve how they work.
Only with buy-in from the top down can you foster a strong and successful data-driven culture.
Avoid the Pitfalls
From optimizing compensation structures and improving recruitment and retention to predicting performance and enhancing decision-making, leveraging advanced analytics within a data-driven culture can be a game-changer. But there are pitfalls to avoid.
Be wary of old compensation systems that can be fraught with inaccuracy and inefficiency. Legacy systems, which often rely on manual processes or siloed software, can introduce risk and impair business performance, among other things.
Broker-dealers will also want to avoid “quick entry,” which is a feature that allows users to manually input data rapidly. Quick entry often trades accuracy and quality for speed. Instead of leaning into this feature, it’s best to use a system that ensures all data collected comes from an electronic file, not human entry, reducing inaccuracies and leading to more complete and actionable data.
Effectively leveraging compensation data is a powerful way to boost business performance, attract and retain top talent, motivate a workforce and improve client satisfaction.
With the right tools and firm culture, this data can provide a treasure trove of benefits, but to fully unlock them, it’s important to avoid common pitfalls like relying on legacy systems or manual data entry.
In the end, compensation data should not simply be a tool for managing how a broker-dealer pays its people. Instead, it should be a strategic asset that can drive business growth and long-
