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It’s Not Just About Salary: Purposeful Staffing

I routinely get calls or questions from advisers about compensation for a staff position or junior adviser. Whether it involves hiring/retaining a junior person, or a staff member trying to make a case to their firm about how underpaid they are, the conversation is less about salaries (although it does come up) and more about incentive or variable compensation and bonus. Instead of providing a number or formula, I’ve been asking what would it take that person to leave your firm and why are you doing things? If you know what kind of firm you’re running, and what your goals are, you can be purposeful with compensation.

What Behavior Do You Want?

Over the years, I have lived by a simple rule when it comes to compensation: compensation, especially with variable comp, should be used to drive better behavior. More importantly, advisers shouldn’t have to stick with the same variable comp structure every year as priorities and goals may change. I ask the adviser to think about the goals of their firm, more importantly the leading indicators of success and tie the metrics around those indicators.

As I said, the conversations are changing lately—they are becoming broader. Today, we start with a conversation about work environment. We answer and discuss:

  • Is there a clear vision and purpose for the firm (Do you know where you are headed)?
  • Does the employee have/want the opportunity to grow and is the path laid out for them?
  • Is there a sense that the employee is fulfilled?
  • Is the employee valued?
  • Is compensation really the issue you are trying to solve for?

In my mind, staff more often leaves a business for reasons other than compensation. The biggest reason is always around the vison of the firm and where they fit.

Purposeful Staff

In our most recent paper, “The Purposeful Advisory Firm,” my co-author Raef Lee and I discussed the concept of value engineering for advisory firms. The idea was that an advisory firm has a few levers they can pull that can determine the firm’s direction. Moving a lever in the right direction can propel the firm toward successful enterprise or to a lifestyle firm. I think the people (staff) lever is the most important.

How you use talent can be the key to your success, so it is critically important to understand, communicate and plan for the direction of your firm before you discuss variable compensation with the staff. How can you decide on a number if you don’t know what you are paying for or the direction that the compensation will take your firm?

Lifestyle Versus Enterprise: Questions for You

Before you get into the dollars and cents of a compensation plan, I think it is important to ask questions that can help move that value lever:

  1. Do you aspire to take your firm to the next level? (In addition, can you define what that next level looks like?)
  2. Do you have the appetite for adding (and managing) more employees?
  3. Do you have it in you to fire yourself as adviser and hire yourself as CEO?

If you answer yes to all three of these questions, you are heading down that enterprise path. You will be busy with defining roles, job descriptions and creating a path for all your team members to grow within your firm. Yes means looking at a team approach to the client service model and possibly a chief operating officer hire. The enterprise variable compensation will look at the big picture of the firm and how you are building it for the future.

If you answer no, then the lifestyle approach may be calling you. And figuring out that variable compensation is going to be even more important. You should create a plan that reinforces longevity, continuity and service. The lifestyle firm cannot afford huge turnover that will force the adviser back in the day-to-day operations of the practice. Morale and culture are very important to retain existing clients and strengthen the brand of the no-doubt personality driven firm.

Consequences

Not having a purposeful compensation plan in place leads to employee retention issues. A purposeful plan leads to maximizing the hire for the future direction of your firm. I am often accused of sounding like an attorney (or an economist). When someone asks me about compensation, instead of a direct answer, I now say, “It depends on you.” What kind of firm do you want to be?

Editor’s Note: Join SEI and FPA for a webinar titled, “The Renaissance in Charitable Trust Planning,” at 2 p.m., Eastern, April 18. Register for the webinar here. Also, a version of this blog post first appeared on SEI’s practice management blog, Practically Speaking.

John Anderson

John Anderson is the managing director of Practice Management Solutions for the SEI Advisor Network. He is responsible for all programs focused on helping financial advisers grow their businesses, create efficiencies in their operations and differentiate their practices. He is also the author of SEI’s practice management blog, Practically Speaking.

 


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What We Can Learn from Career-Changer Advisers

Do you know a career-changer adviser or have one on your staff? They bring a certain skillset that many lifelong financial advisers may benefit from.

One individual I know retired from the military and began his career as a financial adviser when he was in his 40s. He was quite comfortable in his role as leader of a growing ensemble firm. He was adept at enhancing efficiency through the use of consistent processes, attending not only to the firm’s top line but also to margin and profitability, delegating to staff, focusing on teamwork, mentoring young advisers and building a culture of camaraderie. These aren’t usually the responsibilities advisers say they excel at; instead, most say they much prefer spending time with their clients than managing the business.

Can we assume, then, that some career-changer advisers are better business managers than financial advisers who have spent their entire careers in this industry?

What Career Changers Bring
There is no actual data to validate my hunch, but if you think about it, there are a few reasons why an adviser who came from the military, engineering, health care or some other industry would find success as a business owner. Let’s look a little closer.

Lifelong financial planners often have no formal business training; after all, you don’t get CE credits for learning how to be better businesspeople. In fact, at conferences, there’s a built-in incentive to go to the sessions offering CE credit and a built-in disincentive for the practice management sessions. Consequently, developing or enhancing leadership and management skills or business acumen in general plays second fiddle.

When an individual starts a second career, however, there is an opportunity for a do over. You get to assess the new industry you are joining and learn best practices to apply from the get-go? (if you had the chance to start your financial planning career over, wouldn’t you do some things differently?) Plus, those who change careers have often learned from their earlier experiences and know how to avoid certain bad habits the second time around.

Of course, career changers are often older and more mature. That maturity may also be accompanied by greater financial stability than a newbie adviser just entering the industry would have. For example, instead of taking on every client to make ends meet, the more established individual can select the clients who best fit his or her niche and how he or she wants to present the firm to the public.

Last, there is something to be said for bringing external knowledge into this industry. That’s probably true for any industry. It’s not a leap to suggest that prior experience leads to increased wisdom.

If This Is True, What Difference Does It Make?
If you have a career changer in your firm, perhaps that individual has insight that could be useful to you as the leader of the firm. If you are considering a career changer as a successor, that individual may possess some valuable skills less commonly found in the financial services industry. Consider also that, as our industry shrinks, perhaps we need to recruit from non-traditional niches.

If it’s logical to assume that career-changer advisers often possess better business management skills, then it follows that financial planners who switch industries might be observed to have exceptional relationships and, of course, financial planning skills. It’s just that financial planners seldom move on to a second career. Why would they, when this one is so gratifying?

Joni Youngwirth_2014 for webJoni Youngwirth
Managing Principal of Practice Management
Commonwealth Financial Network
Waltham, Mass.


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What Comes First—Changing the Tech or the Staff?

Firms are struggling with technology adoption because they believe their executives or staff can’t change or learn new methods of operating. So they stop implementing the tech (aka the change) and instead start interviewing potential hires to replace their current staff who appear unwilling to change and learn. This stoppage and hiring effort creates a dark cloud over the mood of the staff. It sends a message that the firm isn’t prepared to improve nor invest in change management. Rock star-quality staff take this stoppage as a sign and ultimately stop recommending improvements and cease their championing of change. If the stoppages happen often, your best staff might even start interviewing at other firms or start their own firm.

How do I know if my staff are able to learn new systems?
The easiest way to test the team’s ability to learn is to sell the change before implementing it. As the firm owner, you must believe in the change, know the benefits, and persistently encourage productive feedback. Remember that the administrative person might care about reducing data entry work, while the adviser will want this change to help them onboard a new client more efficiently. Staff that can’t adopt the change will stand out immediately. If they are your key team members, have your executive team talk with them and explore why they are resistant to the changes. Then, and only then, will you know if it is time to search through the resumes and start to recalibrate the staff with a new hire.

Do I lay off a loyal staff person when they can’t learn?
We all know it is very expensive (money, energy, time) to lay off and hire someone new. Any new hire requires you to use energy and time to train them on your firm’s method of operating, philosophy regarding client service and expectations. It is best to NOT lay off those who seemingly can’t embrace change and instead invest in training and change management first. Training can be in the form of scheduled weekly webinars, paying an outside expert or software provider to provide customized training, or having a staff person train his/her peer. Change management comes from the top. If you are not sure you are managing change properly, you can hire a coach to learn how to do this effectively now and in the future.

While you invest in training and management, you should also be scouring the earth for potential hires. A great employee, successor, or partner hire won’t fall into your lap the minute you decide you want to re-calibrate your team. It is never too soon to start networking and doing informational interviews and building your pipeline of candidates. If the training and change management does not produce the results you want, you know you can call upon a pool of qualified candidates.

Change isn’t easy—if it were, everyone would be doing it! Remember that any meaningful technology change—even implementing a new software program—takes more than 66 business days to adopt. Give your staff time to embrace the new tech and provide continuous training, positive reinforcement and examples of the long-term benefits. Most importantly, be sure to give yourself time to lead the troops with a positive attitude and realistic change management goals. Progress may be slow but as long as you’re seeing change transpire, rest well knowing your firm is on the right track.

Jennifer Goldman

 

Jennifer Goldman
Founder
My Virtual COO
Boston, MA

Editor’s Note: FPA members receive a $500 member discount on a My Virtual COO consulting engagement. You can find more information here