How Much Is That Planner In The Window?
The Financial Planning Association in May polled some 1,500 planners, pinpointing 21 of the most common financial advisory positions, how they are paid, and what their responsibilities are. Then it broke down these numbers further by region and education level. The association has published its findings in a new booklet, Financial Planning Salary Survey, and spread the word at its 2009 Anaheim conference.
Among the key findings: The average annual compensation among sole practitioners nationwide is $115,266. Among the nine geographic regions profiled, the highest paying region is the East North Central, with an average pay of $168,625. Other top paying sections include the Pacific ($134,419) and East South Central ($129,571) regions. The West North Central ($74,800) and Middle Atlantic ($83,600) regions are the lowest paid.
But all work and no play isn't necessarily the ticket to a fat paycheck. FPA's survey found that sole practitioners who take 21 to 30 days of vacation a year make an average of $111,696; that's 12% more than those who take 15 days or less.
Regarding employment trends, nearly one-third of financial planning practices plan to hire additional staff in the next 12 months. And almost 80% of firms offer 401(k) plans to their employees, while 80% of those firms match employee contributions or salary.
Ian MacKenzie, FPA's managing director of knowledge and business development, says the survey is a thumbnail guide to help advisors know what their peers are paying for employees doing similar types of work. "Because the profession is in a seminal phase, there's not a lot of standardization of job descriptions," he says. "People don't have good job descriptions or they're all over the place. Business owners must figure it out on the fly."
Becca King, manager of the FPA Research Center, blames the confusion about salaries on the fact that many times employees do lots of different jobs, especially at smaller firms. The distinction between junior- and senior-planner job functions often isn't clear if not spelled out. King saw this firsthand at the Anaheim conference. "I was actually just talking to somebody who was trying to figure out, am I a junior planner or a senior planner?" she says.
The study found significant disparities in senior planners' income among firms. Those at smaller firms (one to five employees) tend to make more, an average of $113,369 in salary compared with a salary of $94,694 at firms with 31 employees or more. But it's also likely that senior planners at smaller firms wear a lot more hats, and the compensation reflects that. Another surprising finding, King says, was that senior planners with advanced education like doctorates or master's degrees didn't necessarily command higher salaries (notwithstanding JDs and CPAs, who can ask for more).
Instead, King says higher compensation tends to dovetail more with time spent doing actual planning work and direct
work with clients.
"There's the people who work with the client and then there's the people who don't and the people who don't tend to get under-compensated in terms of sort of a national average," King says.
The Financial Planning Salary Survey is available for $125 for FPA members and $350 for nonmembers at the FPA Store.
Citi Embracing Fee-Only Model
Citigroup last month said it began transitioning the bulk of its financial advisors at its retail bank locations away from commission-based compensation and into a fee-only model. The advisors are part of the Citi Personal Wealth Management unit, a recently branded network of branch-based advisors led by Deborah McWhinney, former president of Schwab Institutional.
As part of the new makeover, Citi's fee-only advisors are to comply with a fiduciary standard and will charge fees based on assets under management. The goal is to convert the 600 advisors at Citi Personal Wealth Management to the fee model by 2011. Currently, advisors are paid a percentage of the commissions charged to clients. A Citi spokesman said the new compensation plan hasn't been finalized yet.