The Current Climate

During the past week, I came across an interesting compensation plan for a producer that I had never come across before. Usually, it is the standard two year non-recoverable draw or declining base salary model, but this one specifically addresses the producer who brings significant BORs to his new employer.

Here’s how it works: Let’s say the producer has a demonstrated compensation history of say $150,000. He departs his existing firm (Firm A) after two years and begins to roll over previous clients from the firm he worked for previous to Firm A. Call this Firm B. Since his two year non-compete from Firm B is just now expiring after two years, new producer calls on his previous customers from Firm B and learns that he can roll over a significant portion of this business. Hence, his new firm (Firm C) hires him on the basis that he can bring over a significant portion of these Firm B BORs. As such, to mitigate the risk of a high starting base salary, Firm C offers new producer a very low base ($70,000), but promises new producer 100% commissions (dollar for dollar) for any BORs delivered; to be immediately paid upon BOR presentation. At a negotiated compensation level (say $150k) the standard compensation plan takes over.

This is a win-win for both parties as the employer is not on the hook for a large monthly commitment from Day One and, if the producer delivers, he/she can quickly get to their previous level of compensation without having to painstakingly build their book of business all over again.

Feel free to give me a call on this compensation plan or any others as firms are getting very creative given the current economic climate.