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#5: Why Build a Bigger Firm: Career Path for Advisors

It’s not a secret that, in order to run a successful business with a thriving team, you need to have career paths in place. When you bring top talent into your business, it’s key to show them where they can grow to, and provide clear action steps for them to increase their value to your firm and earn promotions, pay increases, and more responsibilities. 

Unfortunately, small businesses often struggle to create career paths and opportunities for their employees in the same way larger firms can. It’s through no fault of their own. Often, smaller firms may not have the ability to foresee what an individual’s role will evolve to over time. They may not be able to predict whether the cash flow will be there to warrant promotions or increased responsibilities. They also may not be sure how to successfully elevate an employee to a partner level without sacrificing their own stake in the business. 

However, career paths are critical for hiring and retaining new talent in the financial planning profession. I often think that there are three key topics that are critical when thinking about career paths in the framework of your practice:

  1. Next-gen advisors have a deep desire for a clear-cut career path when they’re first hired.
  2. Career paths can be challenging to build if you don’t have the scale to support them.
  3. Every career path framework needs to include a few key things to be viewed as valuable by both the business and the employee. 

Ready to learn more about advisor career paths? Let’s dig in.

Next-Gen Advisors

I’d like to share a case study about a guy named Gerry. 

Gerry is now retired, but he was a successful, independent financial advisor. He had started as a life insurance agent in the 1970, and eventually obtained securities and then advisory licenses and registrations. When I met Gerry, he had accumulated about $50 million of client assets for around 200 households. When we met, Gerry shared with me that he had tried hiring junior advisors in the past. He had hoped he could find a good one to eventually buy him out and serve as his retirement plan.

The first one he hired was a contractor on a 100% commission payout, and Gerry sponsored him to take his FINRA exams. Once he passed, he quit his other job and started working full time for Gerry. Unfortunately, the result of this commission-based model was predictable. The poor guy only lasted a few months before he ran through his savings, and needed to go back to work and get a paycheck.

Gerry tried again, and the second time he bit the financial bullet and offered a salary. This time, the junior advisor lasted longer, which almost felt more cruel to Gerry, because without a commission element to his compensation, there wasn’t much incentive for the new advisor to go find new business. 

Gerry spent weeks and months training, teaching, encouraging, prodding, and cajoling this junior advisor to generate some new business to no avail. Eventually, he had to fire the junior advisor, and he was back to square one with no succession plan. The salary was down the drain and he had squandered two years as he neared retirement.

After that second failed attempt at developing a junior advisor, Gerry took my phone call. We ultimately agreed to buy his business, and to service clients with our large ensemble wealth management team. Because of our scale, our firm is able to train new advisors continuously.

They conduct meetings with veteran partners of our company and they really learn the ropes. We have a clear career path in place, with a fair salary and well-designed bonus plan that incentivizes exceptional work and lead generation. 

The truth is that the financial services industry is slowly losing advisors. As more and more firm owners retire, we aren’t able to replace them with new incoming associates quickly enough. There’s a huge knowledge gap between retiring advisors and someone who is just starting out, which makes it hard for solo shops to create viable succession plans that serve their clients well.

To bridge this gap, advisors and business owners need to determine what the next generation of advisors want, and how we can set them up for long-term success. The truth is that one of the number one things the next generation of advisors are looking for is a well-defined career. They want work-life balance, and may be less inclined to pursue an aggressive entrepreneurial lifestyle. 

The careers next generation advisors are seeking are focused on wellness, fulfillment, and a healthy approach to their work. They’re passionate about serving their clients, but are equally passionate about being dedicated to their families and passions outside of work – both of which are admirable qualities. 

These new advisors want a career path that helps them to pursue their individual interests and goals, while contributing to the greater good of their clients. They truly want to make an impact. It can be tough for them to see how they’re doing that as a commission-only junior associate at a small firm. There needs to be high-value work being done, a clear path up, solid work-life balance, and a fair compensation (with room for future growth). 

The Challenges of Creating a Career Path

This is a perfect pivot to my next topic: the challenges advisors face when building a career path without scale. The two primary roadblocks advisors run into are:

  1. They’re short on time.
  2. They’re short on money.

Sound familiar?

The truth is that all small business owners are short on time and money, both of which are required to build a quality career path for a new hire. When we think about building a career path, it’s incredibly time consuming. There’s the time spent hiring and training your new junior advisor. But the truth is that the biggest time spend you’ll run into is on-the-job learning. Your new hire has to do in order to learn, which takes years of energy, training, and mentorship. 

When you hire a new financial advisor, it can really feel like your business is taking a step backward instead of forward when you’re spending all this time trying to bring a new advisor up to speed. However, with a larger firm, you have a few key ways to sidestep the time constraint issue of training and developing a new advisor. They can also offset the financial dent of salary, benefits, vacation, retirement plan, and licensing due to their increased cash flow and the firm’s scale. 

Larger firms often have enough revenue that one new advisor salary and benefits are a relatively minor bump in expenses. Just thinking about math, if your total revenue is $500,000, $50,000 salary is 10% of revenue. If your total revenue is $10 million, that same $50,000 salary is a half a percent.

Larger firms also have more people to help with hiring and training. New advisors can sit in meetings with multiple experienced advisors and get mentored by a variety of veterans. Client service managers can show them the software and acquaint them with policies and procedures and best practices. In some firms, you even have dedicated training professionals on their team to help do the heavy lifting.

Building a Career Path

At our firm, we’ve built out a career path system – and it’s taken a lot of work. There has been a lot of trial and error over the years, and we’ve developed a way of building career paths that use real elements to create successful, long-term careers for our employees. 

The first step we take is ensuring that the new advisor’s career path is aligned with our client service experience. Rather than having your new advisor only serve one type of client, they should be set up to grow successfully into your long-term client service experience model. Creating one-genre employees won’t serve you, your employees, or your clients. 

Let’s look at an example. When an advisor is new and first comes on, they may be bringing on smaller households to manage. You need to clearly define the types of engagements they need to handle for every new level of responsibility they want to achieve. 

For example, clients who bring a higher revenue to the table offer more value to the firm. However, they’re often more complex and detail-intensive. Being clear about the level of responsibility required to serve and onboard those higher-level clients is key to showing your new hire how they can grow. This ties into step two and three – creating clear responsibility expectations and defining salaries.

Your second step should be to build a career path that includes clear expectations. These expectations are very important when you’re doing expectation management with your new advisor. Increasing levels of responsibility need to be clearly articulated and spelled out. You have to make sure they understand exactly what they need to achieve to start to move up to the next level.

Titles and salaries are also critically important – especially as you build a ladder for them to climb. As your employee achieves higher levels of responsibility, their title and salary need to fairly reflect that. It’s also important to be clear about these increases upfront. Your new employee deserves to know exactly what title and salary increase they’re working toward.

Next steps are to create a benefit plan, and to create a work environment that’s appealing to your new employees. Although there are times when independent advisors who partnered with our firm struggle being viewed and treated as an employee, it’s rare. 

We emphasize independence in our work environment, and having a company benefit plan is appealing to many advisors who have tried to build their own practice – which is a ton of work! We also have a career path that includes a route to ownership, if that’s something they’re interested in later on.

Career Paths Benefit Clients

When your career paths are aligned with your client service model, you’re multiplying the number of people who can serve your clients well and according to your values. Personally, we abide by the fiduciary model. Having an advisor career path that prioritizes a salary takes away any pressure for our advisors to sell commission products to our clients. They get no personal benefit from making those recommendations. This positively impacts our clients because they’re continuing to receive services that are 100% focused on their best interests. 

Career paths also increase advisor retention, which means clients are more likely to be served for a longer period of time by tenured advisors. This creates a consistent experience and the ability for us to build lifelong, trust-based relationships. 


Wondering how you can leverage a larger firm to build career paths for your practice? 

The Promise and Perils of Hiring a Junior Advisor

Further reading