Many financial advisory firms have grown so fast that they've lost sight of building and nurturing their talent ecosystem, or they're simply clinging to outdated practices. After all, when today's leaders got into the business, it was about betting a bunch on a hunch, smiling and dialing, or even walking across hot coals—and many still expect the next generation to follow that path. But the game has changed.
Today's wealth advisory leaders often become accidental owners, grappling with uncertainty or reluctance to invest in talent development and initiate meaningful conversations about career growth and performance. As a result, leaders often neglect these critical areas. Ironically, human capital—the largest expense item on most P&Ls—is being overlooked. If you expect your clients to receive exceptional advice and care, you must invest in delivering the same experience to your team. Neglecting your people is no longer an option.
With each passing year, managing the expectations and ambitions of your next-generation leaders becomes both a more complex and pressing challenge. I recently had the opportunity to sit down with a group of young professionals – all on similar career paths but working for different wealth advisory firms. Having formed their own study group (meeting monthly via Zoom and connecting in person twice a year, often at conferences), they shared ideas on their careers, compensation structures, and long-term goals, demonstrating a clear desire to grow within their firms.
They were all, however, encountering the same frustrations. Each highly valued their current firm. But their firm founders – many of whom had made implicit promises about future career advancement, bonuses, and equity ownership – had taken few tangible steps to follow through on those commitments.
As a result, their leaders failed to provide clear guidance or measurable expectations for what it would take to grow their careers or develop into partners and equity owners. The unintended consequence is a breakdown in trust—team members feel disengaged, undervalued, and uncertain about their future within the firm. This erosion of trust can quietly spread, undermining morale, performance, and long-term retention. With the group I was coaching, this was indeed the case.
The cost of replacing a top performer can be as high as 213% of their annual salary (accounting for recruiting, onboarding, lost productivity, and cultural impact).
During my conversation with this group, I recommended they pursue the following six strategies – the essential components needed to create a thriving environment where talented professionals feel supported, motivated, and empowered to build a future within your firm. After all, the payoffs for founders and controlling owners are significant when employees imagine their future and take ownership of their careers and development.
As leaders, you play a crucial role in successfully implementing these strategies and collaborating with your team to retain top talent while cultivating the next generation of firm leaders.
Action steps:
Develop individualized career plans during annual professional development meetings
Outline specific competencies required for advancement at each stage of the career path
Provide ongoing education and leadership development opportunities to help team members grow
According to a recent Harvard Business Review study, organizations offering well-defined career paths see significantly higher employee retention rates and increased engagement. This is especially true for younger professionals seeking clarity and purpose in their careers. Clearly communicate base salaries, bonus structures, and long-term incentives (e.g., LTIPs and equity participation)
Align compensation with key performance indicators (KPIs) and results tied to the firm's growth and profitability
Provide annual compensation reviews that address expectations and any proposed changes to the plan
According to Gallup research, companies with transparent compensation policies experience higher levels of employee satisfaction and productivity, which are crucial ingredients for building a high-performing team.
Adjust key quarterly results to reflect changing business priorities and ensure flexibility
Set annual goals aligned with your firm's strategy and individual career plans
Involve team members in creating their own quarterly objectives; encourage ownership of their roles
Firms that update key results quarterly remain agile and ensure that individual efforts align with the business's evolving needs.
A firm recently enrolled in our coaching program has a founder who made so many implicit ownership promises to different team members that trust has eroded, and internal divisions have fractured the culture. What was intended as an inclusive approach is now backfiring, causing top talent to leave and entertain offers from competing RIAs.
This is a tricky topic because not every next-gen leader is suited for equity ownership—they may lack risk tolerance, business growth skills, capital, or a clear understanding of ownership. Some excel as partners but not as owners. Founders may also struggle with defining their own future, equity dilution, or derisking, leading to unintended fractures if left unaddressed.
Action steps:
Develop a formal partnership agreement that outlines the criteria for becoming a partner (including performance benchmarks and time requirements)
Create long-term incentive programs so that high performers in your team have good reason to engage in building the firm's future
Communicate the equity ownership process early and often so your employees know what they're working towards
Offer partial ownership or phantom equity as an incentive to align the interests of future partners with the firm's long-term success
A clear pathway to partnership or equity ownership will motivate your high-performing professionals to stay with the firm and work towards becoming partners – helping reduce turnover and improve your succession planning options. Founders or controlling owners must define their timeline, plan ownership transfers, identify future leaders, set milestones for stepping down, and align financial goals with their shares and wealth creation.
Institute Formal Reviews and Professional Development Meetings
In firms lacking consistent performance reviews, leaders often create uncertainty for team members about how their contributions are assessed. Performance reviews, which focus on reflecting on past achievements to foster learning and growth, and professional development, which looks ahead to build new skills and experiences for future improvement, are both essential. Together, they provide valuable feedback, guide personal and professional progress, and align individual efforts with the firm's objectives.
Action steps:
Conduct formal reviews quarterly (or at least twice yearly) to ensure continuous feedback and course corrections
Focus professional development reviews on future goals and skills development, helping team members grow beyond their current roles
Include 360-degree feedback to provide a well-rounded view of each employee's performance
Harvard Business Review research shows that companies that conduct regular performance evaluations combined with forward-looking development planning see improved performance, higher engagement, and more effective career progression.
Discuss recent progress, challenges, and next steps while also checking individual well-being
Take advantage of available tools and platforms (like 15five.com) that offer structured approaches for maximizing the effectiveness of 1:1s
Research shows that teams with frequent 1:1 meetings experience higher engagement and alignment, improving organizational performance.
The Case for Building High-Performing Teams
Although it requires intentional leadership, creating an environment and culture where next-generation leaders feel valued and supported is well worth the effort – resulting in higher retention, engagement, and performance. In fact, according to McKinsey & Company research, high-performing teams are 20-25% more productive than average teams, driving better client outcomes and increased profitability. All you need to be successful are:
Clear goals and expectations mapped out in written roles and responsibilities
Incentives aligned with firm-wide goals through transparent compensation structures
Growth opportunities with well-defined career paths and professional development plans
Open communication, fostered through frequent 1:1s and structured feedback
A culture that promotes sustainable performance and personal well-being and encourages employees to thrive professionally and personally
The Path Forward for Next-Generation Leaders
To successfully navigate succession planning and future leadership transitions, you must start investing more in the next generation of talent. Leaders must partner with team members to create clear career paths, provide transparent compensation plans, and offer regular feedback to foster trust and engagement. Armed with these six strategies, you can build an environment where a new generation of partners is ready to lead the firm into the future.
They're eager to take ownership. They need your guidance, clarity, and trust to thrive.
Future-Oriented Coaching Questions for Leadership Teams
How are you actively investing in your next-generation talent to ensure their long-term engagement and career satisfaction?
How well documented is your employee value proposition (EVP), and how effective are you at communicating the benefits of being a member of your team?
How do you ensure transparency and alignment between individual contributions and your compensation structures?
How are you fostering a culture of open communication, performance feedback, and personal growth? How can you improve how you engage and lead feedback and advice from a collaborative perspective?