3 questions owners should consider before hiring a junior adviser

There comes a point for many independent business owners when they experience time constraints that make it difficult to scale and grow their business. Often, they've built a strong foundation of clients that requires a majority of their time to manage, leaving little opportunity for prospecting new clients or book acquisitions. It’s at this crossroad that recruiting a junior financial adviser can not only help solve time management issues, but also provide scalability along with built-in succession opportunities.  

To put some numbers behind this observation, in a recent internal survey of Raymond James independent business owners, the average total head count in a branch increased by about 20% when the branch’s production increased from $3 million to $5 million. As firms reach the $10 million threshold, the head count increases by an additional 40%. From our insights and conversations, there's a direct correlation between asset growth and head count.

Once the decision is made and a firm has identified a junior adviser who's a good fit for their business, the next step is crucial. The biggest and most common mistake in this process is going into an offer negotiation unprepared. How a business owner establishes expectations can set the tone for the new adviser's satisfaction and success for years to come. These three considerations are useful starting points for that conversation.

DOES THE COMPENSATION STRUCTURE ALIGN WITH PRACTICE GOALS?

Based on our internal survey, about 77% of junior advisers have zero to five years of industry experience. These are fairly new financial professionals, and they’ll want to know exactly what to expect in terms of upward mobility and the mentorship support to achieve their goals.

One of the strategies we recommend is offering a base salary plus a discretionary bonus. This provides a wide range of flexibility to incentivize the exact behaviors most valuable to the practice. For example, the junior adviser might receive a quarterly or annual bonus with 25% based on defined job responsibilities, 25% dependent on overall firm growth, 25% on networking activities and community service, and the final 25% on generating net new assets. While this approach is more individualistic, it puts the adviser in the driver’s seat of their earning potential by rewarding work that aligns to the overall business objectives of the firm.

Another approach to compensation is a base salary plus a percentage of overall firm profitability. A benefit to this type of agreement is that it incentivizes a team versus an individual contributor approach. This offer also signals to the junior advisers that you are committed to their long-term growth and incorporating their input into the spending decisions of the business. As our industry has evolved, we have seen usage of this approach increase over the years to ensure that everyone feels valued and is working together to accomplish team objectives.

Of course, either of these options must be weighed against what the business can realistically afford, with the goal of setting a comfortable base salary and incentivizing for desired behaviors. It’s also not uncommon for the base salary of a junior adviser to be reduced over time while bonus potential increases.

WHAT BENEFITS OUTSIDE OF COMPENSATION SHOULD BE CONSIDERED?

It’s a competitive job market and by packaging compensation with robust benefits, business owners can boost the attractiveness of their offer. Based on our survey, about 60% of firms provide fully paid employee-only health insurance while 40% also cover families. Also, those that provide an employer contribution to 401(k) plans are contributing an average of 4% to 5%.

For firms that fall within or above those standards, it’s certainly a selling point in addition to paid time off, parental leave or other fringe benefits, such as professional development stipends, catered meals or team outings. Additionally, we’re seeing more firms offer remote or hybrid work to adapt to the changing landscape. If this is a scenario you’re considering, it’s critical to find the right candidate who can thrive in this type of environment, as well as to set expectations early on for in-person training and development

HAVE STEPS BEEN TAKEN TO AVOID FUTURE DISCREPANCIES?

Communication is key not only when it comes to compensation and benefits, but also in the exact role and expectations of the junior adviser. While the business owner might be eager to discuss future succession and ownership potential with their new hire, any perceived implied ownership or false promises can lead to legal issues down the line. If the adviser decides to leave and believes they have equity in the firm, they may feel entitled to further compensation.

For that reason, the offer should be clearly documented in writing rather than with a handshake. Knowing state-specific employment laws and working with experts to draft the agreement will protect the business and its hard-earned assets.

Altogether, a successful job offer will not only win the candidate in the short term, but will lay out a sustainable vision for the future. For most businesses, the hiring of a junior adviser is part of the firm’s long-term growth strategy as that adviser develops professionally and becomes part of the fabric of the business. The right talent can ultimately jumpstart growth and have a positive impact on client satisfaction, which is the true bottom line.

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Steve Voss is vice president of independent business consulting at Raymond James.