With the booming growth of the independent advisory industry in recent years, new trends in human capital management in larger firms are emerging.
While business growth is usually a good thing, it also can present challenges for owners dealing with challenging issues. One such issue is position of associate advisors within advisory firms.
Thanks to the industry’s growth, recruiting advisors has become a significant hurdle. Our industry schools and programs aren’t turning out enough well-trained young advisors to keep pace with demand. Plus, due to this demand, the cost of hiring one of these young people has become ridiculously high.
To get the talent they need to keep pace with business growth, many firm owners have created the position of associate advisor. These positions seem to be filled by those who generally are young and have little to no advisory training or experience.
The thinking behind these positions seems to be that while keeping overhead down, associate advisors can assume some work done by a firm’s senior advisors, enabling the latter group to spend time working with more clients. The reality rarely lives up to these expectations.
Typically, there are two types of associate advisors in the industry. The first type does behind-the-scenes work: compiling plan data, making trades, handling issues with the broker-dealer or custodian, etc.
But these staff members tend not to have much training or experience with clients and consequently spend little time speaking with clients or making recommendations, except occasionally in client meetings with senior advisors. (Think paraplanners).
The compensation for associates with little to no experience is typically between $55,000 and $60,000 per year.
The second level of associate advisor is client facing. These staff members give advice to clients with lower-level needs and straight-forward financial situations: taking calls, making budgeting recommendations, dealing with insurance issues, etc.