Confusion Over Salary Vs. Owner’s Compensation
Another key trend in the space is that a large percentage of advisors continue to view the bottom line net income of their business as “take home pay.” There is still a considerable amount of confusion in the marketplace regarding what the typical market salary should look like for an advisor for the day-to-day job they perform and what the dividend or distribution of additional cash based on their equity ownership in the business should be. This confusion creates tension and disagreement regarding valuation and impairs many deals from transpiring. A firm that treats the bottom line as regular take home pay for the advisor fails to adequately reinvest in the business and, therefore, the business is unlikely to last past one generation of ownership.

The Talent Rich And Getting Talent-Richer
Conventional thinking is that there is a profound shortage of talent in the independent wealth management space. And we’re not just talking about advisors here – the most qualified people in operational, compliance, marketing and administrative positions are gravitating to the best firms as well. In addition to compensation, culture and an innovative, forward-thinking nature of a firm will also play key roles in landing talent. Many advisory firms simply cannot offer an overall value proposition that attracts great people. We work in a people business and people are the greatest asset to success. Without great people, firms will fail to become significant. To provide an upward career path for its staff, a firm must grow by at least 15-20 percent annually and many firms struggle to accomplish this. A failure to reinvest in the business makes it difficult to attract new clients and grow the business. This has been masked by the market appreciation of the past five years to a certain extent, but it will catch up to these firms if the market has a bad year.

Matt Cooper is president of Beacon Pointe Wealth Advisors, a national enterprise building partnership dedicated to helping advisors grow their businesses. BPWA is an affiliated company of Beacon Pointe Advisors, one of the nation's largest independent RIAs with over $8 billion in assets under management and headquarters in Southern California.
 

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