Last week, a financial planner named Bill posted this question on the blog:
As a late starter in the independent business, I find myself needing… …the right person to assist and grow the business, and succession. I am willing to train a newly graduated student but am afraid that I would not be able to challenge him (her) sufficiently so as to retain the new hire. Growth of the business is highly dependent on the right person and I would not want to retain solely on compensation. Any thoughts?
Bill hits on an issue that is the key to the success of any growing advisory practice: retaining professional employees to whom he can hand off firm ownership when he retires.
Bill’s instinct is exactly right: It’s not about the compensation. Rather, it’s about business growth.
To retain high-quality professionals, you need to give them a purpose they can take to heart. Helping you grow your business is just such a purpose that motivates people outside of compensation.
But you have to do more than just say the words: you have to make it real for them. That means giving them responsibilities that actually do contribute to firm growth, and then compensating them fairly for contributing to that growth. No matter how big or small your firm is, people need to be motivated by something greater–growing the business–than just by compensation you throw at them.
How do you do that? The best way is to offer professional employees an incentive package that includes a bonus based on the firm’s gross revenue. When you bring in more, everyone gets rewarded. But don’t make the mistake of tieing bonus comp to practice profitability. Profit sharing seems like a good idea but it often creates resentment by employees who don’t have any control over profits. Every time you take a vacation as a “business trip” or buy a new computer you don’t really need, your employees will resent it. Bonuses based on revenues create a team environment where everyone gets rewarded for their contributions to growth–the ultimate motivator for many professional planners–young and old.