“How do I fairly compensate an associate adviser?” It’s a question many advisers grapple with as they bring new staff into their firms. It’s also one you should revisit from time to time, to ensure that your associate’s compensation remains in line with his or her growing responsibilities.
First, Do Your Research
In setting compensation for a new adviser, a good starting point is to use industry data, such as the InvestmentNews Adviser Compensation & Staffing Study. Published every other year, the study provides details on how advisers compensate three different types of associate advisers:
- Support advisers—those who focus on investment analysis and other “behind the scenes” work
- Service advisers—those who service clients given to them, conducting regular reviews and addressing client issues and questions between reviews
- Lead advisers—those who bring in new business for the firm by securing new clients
The study offers a wide range of data for each of the categories, which can help advisers zero in on appropriate compensation for associates.
Over time, though, an associate adviser may gradually move into a new or expanded role. For example, the associate may have started out as a support adviser but now steps up to service clients when you’re absent. Or maybe the associate adviser is progressing so well that you can be away from the office for weeks or even months, knowing that clients and the firm are in good hands. The associate has moved into a “CEO light” position, but has his or her compensation followed?
Be Aware of Shifting Roles—and Adjust Accordingly
In these situations, what many lead advisers don’t realize is that their dreams have come true. Many wanted a continuity plan and now they’ve got one! The key is to recognize the shift—the associate surely has—and increase his or her compensation accordingly.
Of course, if you have a documented continuity plan with the associate, his or her expanded role may fall under the “sweat equity” part of your agreement. If you don’t have a continuity plan in place, it may be time to create one with the associate or, again, adjust compensation based on the role he or she is actually performing. It’s well worth doing so. After all, why risk losing the valued associate you’ve invested so much time and energy developing?
Managing Principal of Practice Management
Commonwealth Financial Network