Registered investment advisory firms or other advisory practices must create career paths and pay plans that evolve quickly enough to keep up with industry competition, advisor career advancement, geographic factors and the company’s long-term goals, according to a webinar last month on compensation trends led by Julia Sexton, the director of strategic organizational planning at consulting firm Succession Resource Group, and Ryan Grau, the company’s director of valuations. They presented the first of what will become an annual compensation study based on data from the RIAs that use the firm’s services. And the central takeaway revolved around the divergent impact among firms that have taken proactive steps, and those that haven’t.
“Today isn’t just about benchmarking numbers,” Sexton said. “It’s about aligning compensation with role, clarity, behaviors, growth objectives and long-term enterprise value, because when compensation is designed intentionally, it becomes one of the most powerful strategic levers that you have in your firm and is so critical to so many transaction and business growth initiatives, succession planning, viability and just the overall cultural and financial health of your business.”
On the other hand, Grau jumped in to add, failing to build an effective compensation strategy is
“one of the quickest ways to derail value.”
What do you make?
Of course, any pay strategy begins with the basic amount that advisors will collect, and just as with any other profession, they will want to know how their pay compares to peers.
Sexton and Grau’s presentation broke down advisor career paths into three general categories:
- Support advisors (less than five years in the field): Responsibilities include planning and investment tasks and starting to identify possible new clients, and compensation includes base salary, bonus and profit sharing.
- Service advisors (five to 10 years, CFP mark): Responsibilities include oversight of planning and analysis, delegating tasks to junior members and much more identification of new potential business, and compensation includes a base salary (a fixed amount plus some pay tied to assets under management), a bonus, profit-sharing and so-called phantom equity (deferred compensation carrying some of the same benefits as actual company stock).
- Lead advisors (10+ years, several certifications): Responsibilities include acting as the primary manager of client accounts, business development and the team’s staffing; compensation includes base salary with AUM-tied pay, a bonus and an equity grant or purchase opportunity.
In terms of the dollar value of the compensation for those types of advisors, it varies significantly. Support advisors make total salary and bonus pay of between $50,000 and $85,000 per year with a median of $65,000; service advisors make total salary and bonus pay of between $66,964 and $120,000 per year with a median of $90,000; and lead advisors make total salary and bonus pay of between $108,000 and $235,750 per year with a median of $159,902.
Disclaimer
This article was first published by Tobias Salinger.
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