As I’ve noted before, I don’t usually write about the people or the companies that I consult with, due to the obvious conflicts of interest. With that said, one of the benefits that I get out of working on an ongoing basis with companies that help independent advisors to better service their clients and run more successful businesses, is that I often get a deeper understanding of the challenges that advisors face and potential solutions to those problems.
A very good example of this symbiosis has been my work with business consultant, human resources specialist and fellow Investment Advisor columnist Angie Herbers. Over the nearly 10 years that I’ve worked with Angie, I’ve learned a great deal about the issues involved in running an advisory firm, particularly about hiring and working with employees. During that time, a significant part of Angie’s business has involved recruiting employees for advisory firms. We’ve spent countless hours discussing the limitations of the available information regarding employee salaries and total compensation, and how she’s had to compile her own data to create realistic compensation plans. Our conversations have usually ended with: “Someday, we ought to publish our data so that the entire advisory industry can figure out what they should be paying people.”
I’m happy to say that day arrived on Aug. 24, when Angie launched her Salary Advisor on AngieHerbers.com. The Salary Advisor is an online tool that enables advisors or employees to answer some simple questions that describe any job within an advisory firm and quickly get an accurate salary and total compensation range for what people in a similar capacity get paid. It’s simple and is based on over a decade of extensive experience structuring compensation packages for advisory employees.
As anyone who’s tried to use industry salary tables quickly finds out, there are shortcomings in much of this data that can lead to unfortunate errors and misunderstandings. The basic problem with existing salary data, as I’ve come to understand it, is the lack of consistency in job titles across the industry. In some cases, data gatherers are simply willing to go with the titles used by the firms surveyed, without bothering to determine what duties the employees in question actually perform. Someone might be called a lead advisor at one firm, a senior advisor at another firm and an associate advisor at a third firm. Consequently, determining whether the salary ranges given for any of those jobs is applicable to someone working in your firm is difficult if not impossible.
In her Salary Advisor, Angie avoids this confusion by basing her compensation ranges on the factors that determine an employee’s value to an advisory firm, rather than anyone’s description of his or her job. To do this, Angie and her team conducted an extensive analysis of their database of employees and their compensation, concluding that there are really only five factors that determine an employee’s compensation level: Firm size, experience, training and education, responsibility and what one might call their team potential.
Firm size is the most straightforward: Virtually all the available data shows that people who work for larger firms simply make more money. In part, that’s probably because larger firms tend to have larger clients that create greater economies of scale and leverage, which is shared by their entire staff (in various degrees). We can argue about the fairness of this fact, but in the end, it’s simply an economic reality that the entire industry might as well learn to live with.
Experience, of course, is usually measured in years in the financial services industry, but some experiences are more valuable than others. For example, two senior advisors, each with 10 years’ experience, might have a considerable difference in compensation; one could have nine years’ experience as a junior advisor and only one year as a lead advisor while the other has four years in a support role and six years in a lead role.
What’s more, various industry backgrounds tend to be valued quite differently by different firms. For instance, an agent with 15 years of experience selling life insurance might be considered qualified for a senior advisor position in a large, full-service firm, but may only be qualified for a junior position at a firm that focuses exclusively on financial planning. The same might be the case for experienced brokers, trust officers, paraplanners and even accountants.