Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
Are you willing to take one more end-of-the-year question on a topic that our team has been wrestling with for some time? Compensation. We have had a great year despite the market turmoil. Our AUM is up significantly, and we have increased fees. The bottom line looks pretty good. The issue is that our support team – assistants, ops and general relationship-management support – does not share in the overall comp of the firm. We never implemented a profit-sharing plan or other bonus pool tied to how well the firm does. The five partners have disagreed from the beginning on how best to compensate our entire team and whether they deserve to participate.
This year the team knows we have had an outstanding year, and we’ve asked a lot of them. The billing process alone had people in here on weekends and until late at night getting communication out, new paperwork in and clients followed up with. We’ve onboarded several new very large clients, and it has required everyone’s participation.
I firmly believe this is the year that, in addition to regular bonuses, we should give the team a percentage of our profits, even if just 1%. All five partners will make significant incomes, and sharing a small percent with our team seems fair to me. But I’m getting a lot of pushback from two advisors who truly don’t need the money they make. They disagree in principle, saying the team members aren’t rainmakers and are a large part of our costs, so they don’t deserve to participate in profits, which is what we have after we pay them well.
Is there a way to have a reasonable discussion about this among the five partners so we all feel heard? If we don’t give the team a portion of what we’ve accomplished, how do we message this so they don’t see that we’ve made the money off their backs?
K.S.
Dear K.S.,
Your note includes several areas to be addressed, so I want to try and do justice to each of them:
- Let’s take your last comment, “….made the money off their backs?” This is loaded language that shows your perspective that your team is a key component of why your firm did so well this year. Be careful about using loaded language with your partners when you have these conversations. This could be construed as judgmental of your partners’ viewpoints. And while judgmental could be your perspective, it never helps in negotiation discussions to diminish someone else’s viewpoint this way. Consider objectively why you believe the team deserves what you are suggesting. Present your viewpoint in a logical, fact-based (as much as possible) and non-emotional way. If you believe team members are vulnerable if not recognized, or they have been overlooked, or the fee increase would not have happened without their help, say those things. But don’t characterize the work as being done “on their backs” to your partners. While it may be true, it won’t get you anywhere in the discussion.
- Your question about how to best have the discussion with your partners is important. You obviously know going into the discussion there are vastly differing opinions about what to do for your team members. You are each going to be in a position of trying to convince one another your viewpoint is accurate. In advance of that meeting, have each partner write their proposal with supporting information about why they believe their approach is best. Have each partner thoughtfully write their perspective, and afford the other partners the time to review and consider it before you discuss. This is a brainstorming technique I often use with teams because it levels the playing field. If you have one partner who tends to be loudest, has longer tenure, or who contributes more than others then when you have discussions without any prep in writing, the negotiation can quickly go off balance.
- The philosophy of compensation in general is embedded in your request. Of all the dialogue I get involved in when it comes to teams, compensation is a key topic. I had a call today with a family team; the dad is founder and lead FA and the brother and sister are both involved. Trying to figure out what’s “fair” is always very challenging – how best to share the pie, what contributions each person makes, how to value people and so on is a never-ending question for many teams. There are no one-size-fits-all answers. If you have a great team that works well together and is loyal and responsible, the last thing you want is to replace any one of them. For this reason, if you have had an outstanding year and they were a key component of onboarding, fee increases and positive client experiences, I would most definitely either vote for extra large bonuses (not directly tied to profit) or creating a profit-sharing element so they can participate in the upside (and years of downside too). Leaders don’t succeed without an amazing team around them and rewarding that team (where appropriate and deserving) validates this. But my team would say I can be overly generous. I don’t think anyone succeeds solo – it takes confidence as a leader to acknowledge how much they value the support they receive and to show that value in dollars and cents!
Dear Bev,
I work on a very high-performing team. We give it our all every day, all day long. My colleagues and I are the key reason clients stay and give us high satisfaction scores on surveys. This is not my viewpoint; clients tell us this all the time, and it comes out in the survey scores.
I don’t understand why we aren’t compensated accordingly. Our lead advisor’s attitude is, “If you aren’t making rain, you aren’t worth more than a market-based salary.”
I get it, somewhat. But if we all walked out (four of us support him in different capacities), the clients would be very unhappy. How do we get him to see this?
K.N.
Dear K.N.,
Sometimes people send me a question or ask one in meetings that I save so I can put like questions together in one article. You sent me yours a while ago, but I thought it was great to include the alternative viewpoint from the first reader who asked about how to compensate the team fairly. From where you sit, you see your value, but you have an advisor who ties all value to clients and AUM/fees. I often see this – it becomes a quantitative equation, rather than a qualitative/client experience one.
Could you carve out some of the comments your team has received from clients – on the survey and given to you as you do your jobs? Compile a list of these and present them to your lead advisor. Ask him to put a dollar figure on the value of the client’s viewpoint outside of the salaries he is paying you. Maybe he doesn’t think in qualitative terms, and it would be helpful to organize this for him.
Check your local area and find out what other teams are being paid for the same work. If he is more quantitatively focused, providing outside stats and data could help him see he might need to be a bit more generous.
Unfortunately, sometimes the leader of a team or firm only sees the fact that the firm is around because of them (and this is true, of course). But they don’t necessarily count the value of the contributions others are making to keep the clients engaged and happy and hopefully making introductions to their friends and family members as a result, so the team/firm continues to grow.
Think from his seat and consider what quantitative ideas you could put in front of him, or how to value the qualitative ones you are aware of but he may not have taken into account.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry, in 1995. The firm also founded and manages the Advisors Sales Academy. The firm has won the Wealthbriefing WealthTech award for Best Training Solution for 2022 and 2023. Beverly is currently an adjunct professor at Suffolk University teaching undergraduate and graduate students Entrepreneurship and Leading Teams. She is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including The Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
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Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here. 