In the first part of our post, we discussed what it takes to be a good partner. In today’s post, well cover the proper level of compensation for a for a job well done, as we’ll as how to get on the right career track.
In the end, the real problem was not that young planners wanted a path to partnership, but that they felt like they had to find a path to partnership to be well compensated for the value they bring to the table as an employee.
I find this is a remarkably common problem in financial planning firms, especially smaller ones. In the past, most firms have had two groups of employees: administrative staff, that get paid administrative salaries, and partners who can earn a much higher income. Accordingly, when a new planner enters the firm, the path to a higher earning potential is clear— if you ever want to earn $100,000, $150,000, $200,000, or more, you “have to” become a partner.
Ultimately, though, I believe this represents a dysfunctional compensation structure for firms. The model that is emerging from many larger firms is that a full range of compensation is available for the jobs people do in the business, from the administrative staff to the planners who work with clients to the CEO of the firm.
Compensation may be some blend of salary, bonuses, and other incentives or variable compensation depending on the role, but compensation is set at a competitive level for the job that is performed, regardless of ownership. Employees who have responsibility for a million dollars of client revenue might be paid $100,000, $150,000, $200,000, or more, depending on the nature of the business—not as a partner, but simply as an employee for valuable services rendered! At that point, those who do have a partnership/ownership stake have additional financial and personal responsibilities for the business and expectations from their partners, and are additionally compensated in the form of profits from the business and an increase in the value of their ownership stake for the additional work they do.
The Real Career Track Goal