Payscale.com and Salary.com are not accurate benchmarks for independent advisors and their Next Gen employees.
When the Next Generation needs an answer they Google it. So it’s not surprising to me that they have turned to human capital Web sites such as Payscale.com and Salary.com to get quotes on what they “should” be getting paid by their independent advisory firm owners. This month, after a slight bombardment by firm owners asking me if I believed the ranges were accurate, I decided to do a little study of my own.
I went to Payscale.com and benchmarked the pay range for an “Associate Advisor.” Payscale told me that the median base salary is about $57,000. Based on the basic job description they gave for an “Associate Advisor” it would be comparable to a “Support Advisor or Paraplanner” in the “2009 FA Insight Study of Advisory Firms: People and Pay” which shows a median base salary of $47,000. Additionally, if I went to Salary.com and searched for “ Associate Advisor” the job title does not exist. But a comparable title based on the description is a “Financial Analyst” which listed the median base salary as $58,000. When testing other similar cases, even the job title “Financial Planner” (i.e., Lead Advisor) my results still showed an inflated difference of 16% to 22% higher than the ranges of comparable industry studies.
Now some are going to make the case that I am not comparing apples to apples with this quick study. For example, Payscales.com and Salary.com both adjust for cost of living, as you are required to put in your Zip code, and none of the industry studies adjust cost of living down to the Zip code from data compiled in certain regional areas. So to test this, I put in the Zip code of “The Little Apple” (otherwise known as my hometown of Manhattan, Kansas) that has a cost of living almost 12% below the national average. Even at the Zp code of my low-ost Mdwest college town, the base salaries were still higher than the industry studies.
Second, a case could be made that comparing an “Associate Advisor” to a “Service Advisor (Level 3)/Paraplanner” is not the same, and I would agree. But herein lays the problem. In conducting my research, I acted in the exact way that your Next Generation employees are going to act to arrive at a reasonable salary range for their positions. They are going to find a comparison and write it off as a “match.” Then, because the base salaries are, in my opinion, way over-inflated, they are going to be disappointed, resulting in a potential performance problem and/or retention issue as the market and your revenues recover.
Based on the number of hits to Salary.com and Payscales.com for supportive type positions in the financial planning industry, now is the time to review all your compensation structures, benchmark them on comparable industry research, and most important, communicate to your employees the method behind a strong comp plan that focuses on keeping good people and sound industry comparables. Don’t let outside, sometimes inaccurate influences pave the way.