From the September 2009 issue of Investment Advisor • Subscribe!

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A sidebar to "Media Star"

With 35 years experience in the business, Dan Deighan can rightly claim to be one of the independent advisory profession's pioneers. Although ownership of the firm is solely his, Deighan has instituted a number of programs recommended by many consultants, including a definite career track and meaningful profit sharing for employees.

Deighan likes to say that his process empowers both his clients and his teammates. His operation has grown to the point where it includes 13 people other than himself. There are four financial planning teams which include both a planner and an assistant planner. "The idea is that the assistant planner will become a planner," he says. "That's the whole idea--to move everybody up along the way and build from within."

Deighan is also unusual in that he has no interest in hiring anyone who already has experience in financial services. "I don't want to untrain anybody," he says.

For those on the planner career track, Deighan expects them to get their securities and insurance licenses in a scheduled time frame. He says that he pays his employees while they study for those exams as well as for any required classes or study materials and even their transportation to take the exams. Yet to the surprise of most of his friends and colleagues he has no employment agreements with any of his staff.

"If they don't want to be here, I want 'em gone, because they're the wrong person," he says. "And if they're going to take some clients with them if they leave, then God bless them. Those weren't my clients anyway, apparently, because if they were my clients, they wouldn't have left."

He hasn't had much of a problem however, with less than amicable separations and says client loss has been minimal and that his retention rates get better every year. One of the reasons why employees hang around might be because they can readily see the reward for their efforts.

"I have a for-real profit sharing plan," Deighan says with pride. "It's paid out every month when we are profitable." He cited this past June as an example of a month when the enterprise showed a profit and all employees got their share in their July 15 paychecks.

To calculate profitability Deighan takes all revenue generated from all sources--new clients, old clients, the RIA, and the broker/dealer--and subtracts a predetermined overhead figure. Of what's left in the pot, he allocates 25% to 33% for employee profit sharing. "So let's say we have a net profit after expenses of $100,000 and the bonus pool is 30%," he explains. "There's $30,000 that gets divvied up according to seniority on the next paycheck, on top of your pay. Probably of the other 70%, the government gets 30% of it, so now, I've got 40% left, I usually keep 10% to 20% moving forward, and the rest I take."

Not surprisingly, Deighan says the program is extremely popular with employees and that clients can see those employees enjoy working there. "It wouldn't work if the only one who was doing well financially was me," he notes.

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