There comes a point for many independent business owners when they experience time constraints that make it difficult to scale and grow their business. Often, they have built a strong foundation of clients which requires a majority of their time to manage, leaving little opportunity for prospecting new clients or book acquisitions. It’s at this crossroad where growth stagnates and recruiting a junior financial advisor can not only help solve time management issues, but also provide scalability with built-in succession opportunities.  

To put some numbers behind this observation, in a recent internal survey of Raymond James independent business owners, the average total headcount in a branch increased by about 20% when the branch’s assets increased from $3 million to $5 million. As firms reach the $10 million threshold, the headcount increases by an additional 40%. From our insights and conversations, there is a direct correlation with asset growth and headcount. We help our independent business owners determine the right time and navigate these critical decisions in their business from team structure to compensation and benefits.

Once the decision is made and a firm has identified a junior advisor that is a good fit for their business and long-term goals – typically through networking, job postings or a recruiter – the next step is crucial. The biggest and most common mistake in this process is going into an offer negotiation unprepared. How a business owner establishes expectations can set the tone for the satisfaction and success of the new advisor for years to come. These three considerations are useful starting points for that conversation.

Does the Compensation Structure Align with Practice Goals?

There are a few different approaches business owners can take to employee compensation. Based on our internal survey, about 77% of junior advisors have 0-5 years of industry experience. These are fairly new financial professionals, likely looking for a degree of stability with a clear path to earnings potential. They’ll want to know exactly what to expect over the next several years in terms of upward mobility and the mentorship support to achieve their professional goals.

If a junior advisor has limited industry experience, one of the strategies we recommend is offering a base salary plus a discretionary bonus. This provides a wide range of flexibility to incentivize the exact behaviors most valuable to the practice. For example, the junior advisor might receive a quarterly or annual bonus where 25% is based on executing defined job responsibilities, 25% on overall firm growth, 25% on networking activities and community service and the final 25% on generating net new assets. While this approach is more individualistic and less team-based, it puts the advisor in the driver’s seat of their earning potential by rewarding work that aligns to the overall business objectives of the firm.

Another approach to compensation is a base salary plus a percentage of overall firm profitability.  A benefit to this type of agreement is that it incentivizes a team versus an individual contributor approach. This offer also signals to the junior advisors that you are committed to their long-term growth and incorporating their input into the spending decisions of the business. As our industry has evolved, we have seen this trend of taking a team approach increase over the years as owners want to ensure that everyone feels valued as an employee and working together to accomplish team goals.

Of course, either of these options must be weighed against what the business can realistically afford, with the goal of setting a comfortable base salary and incentivizing for desired behaviors. It’s also not uncommon for the base salary of a junior advisor to be reduced over time while bonus potential increases.

What Benefits Outside of Compensation Should be Considered?

It’s a competitive job market, and candidates are looking at more than just their compensation plan. By packaging compensation with robust benefits, business owners can boost the attractiveness of their offer. Based on our survey, about 60% of firms provide fully paid employee-only health insurance while the remaining 40% also cover families. Also, for those that provide an employer contribution to 401(k) plans, they are contributing an average of 4% – 5%.

For firms that fall within or above those standards it’s certainly a selling point, in addition to paid time off, parental leave or other fringe benefits offered, such as professional development stipends, catered meals or team outings. Additionally, we’re seeing more firms offer remote or hybrid working situations to adapt to the changing landscape of working environments. If this is a scenario you’re considering, it’s critical to find the right candidate that can thrive in this type of environment, as well as set expectations early on for in-person training and development

The benefits you choose to offer should be reflective of your firm’s culture, and when positioned correctly, these can make an offer stand out in the competitive job market we are currently in.

Have Steps Been Taken to Avoid Future Discrepancies?

Not only is communication key when it comes to compensation and benefits, but also in the exact role and expectations of the junior advisor. While the business owner might be eager to discuss future succession and ownership potential with their new hire, any perceived implied ownership or false promises can lead to legal issues down the line. If the advisor decides to leave and believes they have equity in the firm, they may feel entitled to further compensation.

For that reason, the offer should be clearly documented in writing rather than over a handshake. Knowing state-specific employment laws and working with experts to draft the agreement will protect the business and its hard-earned assets.

Altogether, a successful job offer will not only win the candidate in the short term, but also will lay out a sustainable vision for the future. A strong start to retaining talent is to communicate upfront the new advisor’s potential career path and milestones along the way. Then establish a structured employee review process to help guide them as needed and show that they are valued contributors to the team’s overall success.

For most businesses, the hiring of a junior advisor is part of the firm’s long-term growth strategy as that advisor develops professionally and becomes part of the fabric of the business. The right talent can ultimately jumpstart growth and have a positive impact on client satisfaction, which is the true bottom line.

Steve Voss is Vice President of Independent Business Consulting at Raymond James.

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