Elite advisory firms manage staff with the same degree of care used in managing assets. They practice with a light and even hand, defining expectations and rewarding employees for good performance.
Back in the day before lasers, iPads and e-tickets, tasks seemed to require more physical strength. Horseshoes were forged by blacksmiths plying hammer and anvil. Fields were tilled by men controlling a plow drawn by powerful beasts. Even writers brandished a sharpened quill—or pounded the stiff keys of a Smith Corona.
One former colleague used a manual typewriter for most of his life, from college through his working years, to craft his reports, articles and books. Years later he still attacked a slim computer keyboard as if he were angry at the machine. Old habits are hard to change, including outdated methods of influencing behaviors.
Back when I was a kid, discipline and performance were governed by the physical mandate. Teachers controlled students with corporal punishment (at least the nuns at my school did). Parents used a switch. Employers hired enforcers to engage with underperforming workers. Mental therapists used electricity to stimulate a change in mood or actions.
Previous generations utilized fear and punishment to induce a result instead of encouragement and incentives. Baby boomers and their parents grew up under these conditions. While some have transitioned to a softer touch, others wield their personalities as if swinging a truncheon.
In business, moments frequently occur when managers must repress the urge to flex their muscles. Scare tactics and tough talk are still employed to influence an outcome, manipulate behavior or persuade. Subtlety and nuance are learned tactics, a style that hasn’t become second nature. It’s not uncommon to see talented managers who possess the keen mind of a surgeon—and the touch of a blacksmith.
Over the years, we have observed financial advisors who want their staff to suffer as much as they did on the way up. In the past, interns were given grunt work, not true learning experiences. Promotions and opportunities were held in abeyance until someone threatened to leave. Raises and bonuses were often paid reluctantly, as if employees were extorting money from their bosses.
A clue to underperforming advisory firms frequently can be found in their compensation plans. These strategies expose how firm owners struggle with people practices, rewarding the wrong behaviors and displacing active and effective management.
According to new studies on compensation and staffing, however, efforts around recruitment, retention and reward are becoming more enlightened and better aligned with what makes an advisory firm tick and what makes an individual flourish. Not all advisors are choosing the right approach, but many are blazing a trail, discovering how to translate the cost of labor into a consistent financial return.
The “Investment News/Moss Adams 2011 Adviser Compensation and Staffing Study,” sponsored by Pershing Advisory Solutions, revealed key market trends and techniques in how advisory businesses are refining their human capital practices to drive their firms in a new direction. Instead of using both the carrot and the stick to goad and beat their employees into submission, today’s firms are paying fairly and creating incentive and benefit plans that encourage the pursuit of excellence.
The elite firms identified by the study had 31% more clients, 54% more assets and 79% more revenue than the average firms. They also generated 6% more revenue per staff, 15% more profit and 49% more income per owner.