Fair Pay
“I know my assistant is getting paid far too much,” mused Jerry. “She is getting 2.5 percent of my production, making her the highest paid assistant in the office. She's got an 8:30-to-4:30 mentality, and she acts as though her bonus is an entitlement.”
Jerry had been a coaching client of mine for nearly nine months. Our initial focus was bringing in more high-net-worth clients and positioning Jerry as their financial quarterback. At that point, Jerry had only good things to say about his assistant. “She's been with me five years, and my clients love her. I pay her well, and I don't think we need to spend any time there.” Eight months later, after bringing in some $40 million of new HNW assets, Jerry was changing his tune.
Growth affects many things. Performance expectations and compensation arrangements are two of the most critical, as Jerry was now discovering. His growing production was creating a compensation increase for his assistant that was not being matched by an improvement in her job performance. The equity between performance expectations and compensation was now out of balance, and Jerry was seeing her in a whole different light.
Nothing can drive members of a team apart faster than issues over money. Whether it's overpaying an assistant or underpaying a junior partner, compensation seems to be a dicey issue with many teams. This becomes especially serious with firms that have historically undervalued and underpaid those in the sales assistant role. This often leads to financial advisors being pressured to kick into the compensation pool and give their assistants a small percentage of gross commissions.
On the surface, this formula has merit. The firm pays X, and the financial advisor pays Y, enabling both to monitor job expectations. The disconnect comes when the financial advisor views their contribution as a performance bonus, while the assistant sees it as basic compensation. For the advisor, it is something to be earned. For the assistant, it is the least they can do.
Here is the solution I helped Jerry work out and the results that occurred.
Unbundle compensation into base salary and bonus.
Clearly define 12-month business-building targets for the practice: new HNW clients, new assets, fees percentage, retention, production and any other items important to business growth.
Clearly define roles and expectations, areas of responsibility, fixed daily tasks, reporting, work hours and standards of professionalism for everyone.
Create a bonus pool using current bonus dollars. Jerry did not take any money away from his assistant.
Establish quarterly review meetings where progress is monitored, individual performance expectations are evaluated and bonuses are distributed.
If all is going well, the quarterly bonus is simply one-quarter of the bonus pool that has been set aside for the fiscal year. If things are not going that well, adjustments need to be made. For instance, if Jerry wasn't performing his role in bringing in new business, but his assistant was meeting all performance expectations, shame on Jerry. It should cost him, but his assistant still deserves a bonus. Conversely, if Jerry is bringing in the business (which he continued to do) and his assistant continued to be job-challenged (she was), it should cost his assistant.
There is also another issue. Jerry's assistant lived from paycheck to paycheck and could not wait an entire three months to receive her total compensation. Monthly reviews were quickly instituted. Unfortunately, his assistant was not able to handle the performance expectations she agreed to meet. She was paid $75,000 a year, but could not (or would not) raise her game.
Within two months, Jerry had a new practice manager (his first!) who is compensated as outlined above. Jerry's practice has never been more efficient, enabling him to accelerate his growth while reducing his headaches.
To be compensated for simply being there places the person in a holding pattern. In contrast, I have seen support personnel blossom when their bonus became linked to performance. It requires having definite growth targets, clearly defined performance expectations for each team member and a team leader who is willing to invest his or her time to monitor and review the process.
Jerry was on a growth mission, but it took him awhile to recognize the importance of developing and monitoring team-member performance expectations. In doing so, he also discovered that while underpaying can hurt performance, overpaying does not improve performance. Fair pay is the only way.
Writer's BIO:
Matt Oechsli is author of Building a Successful 21st Century Financial Practice: Attracting, Servicing & Retaining Affluent Clients. oechsli.com
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