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During a breakout session at the recent Barron's Teams Summit in Las Vegas, I had the opportunity to facilitate a discussion with Jeff Brown, President of Stratos Private Wealth, Tony Parr, Partner at Parr McKnight Wealth Management Group, and Jeff Price, Managing Director of Merrill Wealth Management.
Our conversation spanned a range of topics and their perspectives were insightful. Part One of this article details our discussion around career pathing and incentivizing certain team behaviors and outcomes. In this second part, we focus on designing more effective compensation structures.
Some useful compensation design tools, including the InvestmentNews Advisor Benchmarking Study and the CFP Board career planner, will help you explore key metrics such as revenue per staff and revenue per professional. These sources also offer good concepts and principles to help you reimagine your firm's compensation structure.
The following are eight takeaways from the conversation that resonated with me and which I felt would be valuable to share with you in hopes they might generate your own new ideas around attracting, retaining, and compensating your teams. This is a summary of their unique perspectives.
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Set equity expectations early on – and for the most ambitious professionals, before they even come on board. If team members genuinely want to be owners of the firm, they need to understand that it's not about the current owner(s) 'giving' them a piece of the pie. It's about them 'earning' the right to ownership by increasing the size of the total pie (and firm profitability).
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Not everyone aspires to become a lead advisor or owner, and that's okay. Some of your best client service folks may prefer to stay in their lane – clocking in, working with clients, and then clocking out. They still want to make more money as their skills and experience deepen, but they have a different take on work/life balance and want to leave their job when they walk out the door each day.
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Be clear and transparent about how you pay your lead advisors and the milestones a new advisor must achieve to move from an associate advisor to a lead. We let them know precisely how much money they can expect in salary, how much they can make through regular bonuses, and how much additional money they can receive through net new money bonuses.
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Take time to create written compensation plans for every team member– transparent, detailed, and well-documented plans. And rethink your job titles and descriptions as part of this effort. Too many firms don't differentiate enough between types and levels of 'advisors,' leading to compensation expectations that simply aren't sustainable.
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Shift your hiring mindset. Don't hire based solely on who the individual is today, but rather focus on who they could be in 5, 10, or 20 years from now. Show them financially; here's where you're starting, but here's how I see your career trajectory going. Then, discuss how you'll help them develop the skills they need to 'level up.' Be sure to outline how they'll be compensated along the way.
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Make achieving specific professional designations a prerequisite for leveling up into a new role. And commit to having the firm pay 100% for that development. To become a portfolio manager, you need to acquire your CFA. To be on the planning team, you must first earn your CFP designation. Because you are using firm resources to pay for these credentials, it creates much more accountability.
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You won't achieve sustainable growth if you don't have sustainable people. The massive growth many firms have experienced of late (doubling the size of the business every 3-5 years) is leaving people exhausted. In the battle for talent, it's not always about who will pay the most. You need to demonstrate that the job won't be all-consuming.
- As the principal/leader of a fast-growing firm, you may not enjoy hearing this, but you need to make a plan to move into the role of CEO and pass along your clients to others in the firm. It's the surest pathway to sustainable growth.
The best in our business share one significant thing in common. They all have a well-thought-out philosophy and approach to developing, recognizing, and rewarding the professionals who are the lifeblood of their enterprise. Rather than focusing solely on bottom-line compensation numbers and percentages for each role, they consider compensation a valuable driver for the career path they strive to encourage. And they treat equity in the firm as a precious commodity that should never be diluted without carefully considering its impact on the firm.
Clear, unambiguous career paths with measurable milestones combined with creative incentives designed to engage your team members and elicit optimal behaviors. It's a potent recipe for sustained success in growing your business and cultivating the emerging leaders who will one day take the reins and continue your legacy.
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Coaching Questions from this Article:
Here are five open-ended and future-oriented coaching questions based on the article:
- On Visioning Future Structures: Given the emphasis on clear career paths and creative incentives, how do you envision evolving these strategies to further enhance team motivation and retention over the next five years?
- On Leadership Development: As you continue to build and refine your team structures, what key qualities will you look for in identifying and cultivating the next generation of leaders within your organization?
- On Cultural Integration: How do you plan to balance the benefits of a flexible work environment with the need for in-office collaboration to maintain and enhance your company culture as work norms continue to evolve?
- On Feedback and Adaptation: Reflecting on the structured career paths and incentive systems you've implemented, what feedback mechanisms will you implement to ensure these strategies remain aligned with business goals and employee expectations?
- On Innovative Thinking: Looking forward, what innovative approaches are you considering to further differentiate your firm from competitors regarding employee engagement, career development, and compensation?
Topics: Team Development Most Recent
