The Danger of Underpaying Non-Owner Advisors

Even now, the 2007 Moss Adams Studay shows, the average productivity at mature ensembles and market dominating firms averages $511,750 in revenues per professional and $719,330 in revenues per professional, respectively. With lead advisors now making an average $150,000 a year, that leaves quite a gap, especially at the largest firms.

To keep those employee advisors from following the money and setting up their own shops, advisory firms need to make their compensation more equitable. Salaries are one the rise, but have a way to go before these advisors are making close to what they’re bringing in, even discounted for overhead and the convenience of not running their own firms. The larger firms have also stepped up with incentive compensation (69%) and opportunities for firm ownership (85%). But look for the increasing demand for professional employees to drive compensation up even further, eroding profit margins at the big firms, especially if growth in clients and assets under management begins to slow down.