Now that the markets and the economy seem to have turned around, many independent advisory firms are shifting back into hiring mode. Some firms had been forced to lay off staff–in too many cases, people they should have let go much earlier–who now need to be replaced. Others need to grow their firms to handle new business.
Either way, I’ve been inundated with calls and e-mails from advisors who are interested in consulting to determine what type of person they may want to hire, but are more than confused about how to go about it. Here’s how our exchanges typically go:
Advisor: “I want to hire a junior advisor into my firm, but there’s no consistency among the published salary tables I’ve found. Is there a listing that will tell me how much I should pay them?”
Me: “The reason existing comp tables aren’t always helpful is because they are based on surveys of a group of advisory firms, and what they currently pay: if they are over- or underpaying, their averages won’t help you find the salary range that’s right for your firm. But more important, the salary ranges that you find in those tables are for specific jobs–say, lead advisors or support advisors. But the surveys leave the definition of those positions up to each firm; what one firm calls a ‘junior advisor,’ another firm might call an ‘associate advisor,’ which means that whatever salary information they provide isn’t very helpful. Why don’t we just start with what you want this advisor to do?”
In mature professions or service businesses, most job titles and their corresponding job descriptions are fairly standardized. When it comes to independent advisory firms, though, the industry hasn’t yet achieved that kind of consistency: a “paraplanner” in one firm could have the same job as an “associate advisor” in another.
Now that most advisory practices have grown beyond one- or two-person offices, it’s time for the profession to arrive at a standardization of job titles, descriptions, and functions. That would make evaluating job experience and setting comp structures so much easier–greatly increasing the likelihood of hiring the right person for your firm, and keeping them happy in their job.
Much of the confusion over job titles in the advisory world stems from the fact that most folks in smaller firms–which make up the vast majority of advisory practices–wear many hats. Consequently, rather than focusing on job functions, I find it more useful to look at four factors: education and training, length of experience, abilities, and ownership. From that perspective, we can get a much clearer picture of anyone’s value–or potential value–to an advisory firm.
To keep the discussion at a manageable length, today let’s focus on the various jobs held by professional employees of an advisory firm. In any professional business, folks with the appropriate professional training usually hold the key ownership positions in firms or practices. Doctors usually own and run medical practices; lawyers hold the top posts in law firms; etc. The independent advisory industry is no different. “Independence” rules out ownership by financial institutions, while even advisory firms owned by banks or accounting firms tend to be managed largely independently by advisors.
In law or medicine, there’s not much debate about who qualifies as a lawyer or a doctor. But, historically, one of the major challenges to standardizing advisory positions was determining just what constituted “professional” education or training. Today, we’ve largely moved beyond the grandfathering debates of yesteryear, with young advisors coming primarily from accredited financial planning programs, or with a relevant degree in business or accounting. These are folks who qualify to take the CFP exam or are able to challenge it, and only lack their three years of working experience.