In Today’s Tight Job Market, It Pays to Review Compensation

What You Need to Know

  • Here are the pros and cons of some salary and benefit structures that are common in the advisory business.

Even though the Great Resignation typically has had its greatest effect on lower wage earners in the restaurant and hospitality industries, financial planning firms are not immune. In turbulent times such as these, firms need to ensure they are closely monitoring the compensation structures to decide if an adjustment is necessary.

Below are the most common compensation models for new financial planning professionals. They assume the position is a W-2 employee in an RIA. It would be for a paraplanner or associate planner role that is responsible for financial planning support and not primarily doing business development.

Straight Salary

Pros: This is the most simple and straightforward to set and administer from the owner’s perspective. If you need help determining salary amounts, download the New Planner Recruiting 2021 Salary Report, which includes about 200 data points collected recently from job seekers on pay expectations.

Cons: Doesn’t incentivize team members to deliver results beyond basic job responsibilities, which is why it is the least common structure we see.

Salary Plus Commission

Pros: Most common in the hybrid RIA broker-dealer affiliation model. Provides a guaranteed minimum amount each month, combined with upside potential if certain products and / or services are sold and generate revenue in addition to core support-oriented job duties.

Cons: Can create a conflict by encouraging the promotion of products and / or services that are not necessarily a fit for the client situation, and / or “distract” the team member from the support work they’re supposed to be doing for their lead advisor as well. Can be difficult to administer due to the burden of keeping up with payout grids, schedules, rep codes, etc.

Commissions are usually 50% / 50% of the total amount on any revenue generated from product sales for split cases where another planner may be involved, but can be as little as 10% depending on grid payout or amount of contribution to close the sale up to 70-80%.

Salary Plus Bonus

Pros: The most common structure in the RIA channel. Provides a stable monthly base wage, plus upside potential if efforts produce returns above basic job requirements. A typical bonus structure can be anywhere from 5% –25% of the base salary amount. Can be set as discretionary, or formulaic, by firm leadership.

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