Compensation Plan for Advisor Teams

December 4, 2016


When your team members have outgrown the salaries they started with as they start to bring in assets and new clients, the challenge is to compensate in a fair way, with no perverse incentives when you have a team with varying roles and levels of experience. To make it easier to provide examples, let’s assume a team of three: one associate and two wealth advisors.


This structure is intended for a full client-facing team serving a defined group of clients. It’s a catch-all combination of compensation components that motivates a team to maintain great relationships with all clients, regardless of who sourced them, build strong relationships with referral sources, pro-actively contribute to the growth of the firm, and to help each other succeed.


Four compensation components


1) Salary


2) Revenue-based payout


3) New business bonus


4) Profitability bonus



Determining each component will require an iterative approach as each will independently contribute to the whole compensation package.





Salary is the component that you can keep private, as it will be different for each team member depending on the experience and role.  


Revenue-based Payout

The payout based on ongoing revenue rewards everyone for retention of all existing clients, new assets of existing clients, and new client assets. This piece will be a percentage of revenue for the team, divided up to represent the respective roles.  For example, assume the payout is 10% of revenue, and each team member gets X% of 10% based on their role on the team.  For example, an associate (the most junior role) might get 10% of the payout (1% of revenue), while the wealth advisors each get 45% of the payout (4.5% of revenue).


New Business Bonus


The new business bonus rewards new client acquisition.  If you want to encourage pro-active efforts, put a minimum on it.  Determine what you think shows pro-active efforts.  Three new $1m clients for a total of $30,000 new revenue in a year might be the result of simply serving clients.  But eight clients for a total of $80k might indicate a pro-active growth mindset.  Pay out a percentage of that new revenue as a one-time bonus, say 10%, to all the team members, again, according to their role and experience.  Simplest is to assign the same proportions used in the Revenue-based Payout.  If less than $80,000 is brought in, there's no New Business Bonus, but the team is still rewarded for the new revenue with the Revenue-based Payout. If they stretch and bring in significantly more, say $120k, then pay the team a one-time bonus of 20% on the entire amount of new business.  You’ll be amazed at the flurry of business development activity in the last quarter!  


Profitability Bonus


A bonus based on firm profits works best if you are sharing company financials with your staff regularly and helping them see how revenue AND expenses affect the bottom line.  Because this figure is affected by everyone in the firm, this component should be applied to all whether client-facing or back office.  If your firm offers a 401(k), you could make this a non-elective contribution.


Creating a Buzz


You might find this comp model creates a buzz that feeds on itself among the client-facing team members throughout the year each time new assets come in. Reinforce this virtuous cycle by adding a celebration for specific milestones throughout the year.  Acknowledge the team is on track for the $80k new revenue example above by celebrating a $20k quarterly milestone.  I like a nice bottle of champagne...but a nice lunch out for the team will do just as well.


Tweak the thresholds and percentages to fit your situation, but in any proportion, these compensation components reward client retention, a pro-active growth mindset, a cohesive team spirit, and firm success.

What compensation model is working well for you? Do you see other challenges that need to be addressed?



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