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The Fast Track: American Standard

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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.

Collaboration Time

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.

Types of Advisors

To my way of thinking, these young professionals or older career-changers fall under the job heading “associate advisors.” Their training in college qualifies them to perform many, if not all, of the in-house tasks of financial planners. In fact, when it comes to writing financial plans, researching investment options, or using planning, portfolio, or CRM software, they’re often the best qualified in a firm.

Non-professional employees with a college degree often have some experience in a related field such as insurance or brokerage, and usually require a few years to get up to speed in an advisory firm while working on their CFP or other designation. These folks we consider “support advisors.” They need to learn the business from the ground up, often working in the back office, generating client reports, updating client files, and making and reconciling trades.

Once an associate advisor completes their three-year experience requirement and gets their CFP (or equivalent professional designation), they are full-fledged financial planners. But they’re usually not ready to work with clients on their own. Like most other professions, financial advice requires an apprenticeship period.

At this point, with a college degree and three years of experience, these young professionals are usually somewhere between 24 and 30 years old. With the exception of a rare few, they need to acquire the judgment and confidence that are needed to advise “real” clients and get “real” clients to trust them. I call these folks “junior advisors.” Yes, they are full-fledged financial planners, but without enough experience to work with their own clients.

Instead, these advisors are, or should be, fully capable of performing all the tasks of a professional financial planner: creating client-ready financial plans; structuring, monitoring, and rebalancing investment portfolios; researching and handling client problems or issues; working with other professionals such as accountants, lawyers, and insurance agents; and sitting in client meetings, or even conducting some meetings themselves. Junior advisors work directly with senior advisors (who have their own clients), taking as much off their desks as possible to leverage the senior advisor to work with, or attract, more clients. Junior advisors typically have at least three years of experience, and gain more experience and confidence, depending on how quickly their skills mature and the needs of their firms. Many firms use a gradual transition with their juniors, starting off with a limited number of less complex client accounts, and increasing the workload with the advisor’s ability to handle more clients. Then they become “senior advisors” capable of handling their own client base and usually having a “junior” under them.

At the senior advisor level (sometimes called “lead advisor”), career opportunities multiply. Many advisors choose to specialize in one area of financial planning, such as retirement, education funding, or distribution, and trust and estate work cases. Or they may decide that they have a preference for the investment and portfolio side of the business, choosing to become the firm’s chief investment officer. Once they hit the senior advisor level, some decide they prefer the operations of an advisory business more than the advice itself, becoming the chief operations officer, running the firm, greatly leveraging the other senior advisors in the firm, and eventually becoming CEOs. Of course, many seniors move full or part time into a “rainmaking” role, spending significant time outside the office bringing in the new clients that are the life blood of any firm.

As you can see, focusing on the education, experience, and eventually the ability to work with clients, create successful portfolios, attract new clients, or run an advisory business greatly simplifies the career path of a professional advisor and the hiring process for experienced advisors. If a candidate was a “junior advisor” at their old firm–with broad planning experience but little client contact–it’s relatively easy to determine where and if they’ll fit into an opportunity at your firm. They’d be overqualified to be an associate advisor, but may need a few more years to become a senior advisor.

The independent advisory industry isn’t quite there yet, from a standardization perspective. But through conversations and attempts to reduce the current confusing chaos, I believe it soon can be. With consistent job titles and descriptions, recruiting, training, and retaining the right professionals in the right jobs will become the norm–rather than the exception–and the independent advisory industry will become much more efficient, and even better at serving client needs.

Angie Herbers is a virtual business manager and consultant for independent financial planning firms. She can be reached at [email protected].


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