Definition: While it is common shorthand to say that Financial Advisors are paid based on commissions, this is not strictly the case. Rather, their cash compensation equals their accumulated Production Credits times a Payout Ratio. Production Credits may be equal to, less than, or even more than the actual revenue earned by the firm on a given transaction executed by the Financial Advisor on behalf of a client. With stock trades executed on the New York Stock Exchange, Production Credits typically equal the amount of commission paid by the client. For this reason, and because such NYSE-listed equity trading traditionally formed the bulk of the revenue stream (and Production Credits) generated by most Financial Advisors, it became commonplace to conflate Production Credits with Commissions in common usage.
Also Known As: commissions
Alternate Spellings: PCs
Examples: He earned 250 Production Credits on this trade.
