track encourages young professionals to think of the practical next step rather than the faraway destination.
A career track also benefits the firm. It achieves three very important objectives:
1. Creates reasonable expectations: Employees always want to know what will happen next and they will likely ask questions such as: Why should I invest my efforts and talents in your firm? Will I be successful if I do? How do I know I can trust you to lead me to success? Even when such questions are not explicitly asked, they always linger beneath the surface. A career track is not a guarantee for success, but it does help employees feel less anxious about the future.
2. Promotes the idea of progress: Progress helps motivate. Without visible progress it may be difficult to continue putting in effort. A career track enables employees to develop goals that can be structured around the needs of the firm and its values. The achievement of goals can be rewarded with advancement, which can bring desired financial rewards and prestige.
3. Brings a sense of fairness to the firm: In an environment where highly ambitious people are brought together in the pursuit of professional success, many times it will be necessary to explain why one person is advancing while another is not. Without a career track, changes in compensation and other perks become very difficult to explain. In the absence of a system, the firm can be suspected of being run by the “likes me, likes me not” rule.
A career track is vital for the success of a professional services firm. Let's examine what a career track looks like in the advisory industry.
The Advisory Career Track
The idea of what makes a career track in the advisory world is constantly being refined. After all, this is a young industry that is still discovering its best practices. Furthermore, a career track will not and should not look the same in every firm. That being said, there are similarities between firms – particularly large organizations that tend to have a career track similar to the one outlined ahead.
Associate
The associate is the entry‐level position. Associates are also called paraplanners, support advisors, analysts, or junior advisors. Associate responsibilities include gathering financial data; researching funds, products, or stocks at a basic level; drafting financial plans; creating financial models; and managing client data. Associates are often present in meetings but typically do not meet with clients alone. Associates may also have some administrative responsibilities such as completing paperwork, working with clients to make sure documents are signed and delivered, or taking notes and recording them in a CRM (customer relationship management) system. The position reports to a more senior member of the service team, usually a service advisor or lead advisor.
The associate position is defined by the accumulation of technical knowledge. Associates should focus on learning the systems and service methods of the firm (e.g., planning, trading, etc.), acquiring certifications, and completing education programs. Many associates (27 percent, according to the 2015 InvestmentNews survey8) hold a Certified Financial Planner (CFP) designation.
The expectations of the position are defined by the achievement of competency‐based goals. Compensation in independent firms is based on a salary with incentives tied to the performance management system of the firm. The 2015 InvestmentNews survey shows that associates earn a salary between $45,000 and $65,000 and incentive compensation (bonuses) between $4,000 and $10,000.9
Advancement to the next position is based on the associate's ability to demonstrate technical expertise and a good understanding of the service process used by the team. Advancement also signals the ability to work as a member of the service team and a willingness to embrace the efforts and policies of the firm.
Service Advisor
The service advisor is responsible for client service and performs many of the steps in the client process. Responsibilities include preparation of financial plans, analysis of portfolios, and subsequent trading and rebalancing (which may also be done by a separate department). Service advisors answer many client questions pertaining to planning or wealth management, and they are expected to have significant expertise. They work extensively with clients, handling meetings either on their own or together with lead advisors. A service advisor is often called the second chair, to borrow a term from the legal profession. As second chair, they may substitute for the first chair and are generally expected to have a relationship with the client.
The service advisor position is defined by service, meaning the ability to accomplish what the client needs. Through experience, service advisors combine the technical expertise of associates with the ability to communicate with the client. They often supervise their associate colleagues, thus learning how to manage people. It is not unusual to see service advisors handle some relationships as lead advisors. This combination of first and second chair is desirable to see in more experienced service advisors before they are promoted.
This is also the position where training in marketing and business development begins. A service advisor's activities in terms of growth should focus on assisting with the firm's marketing plan. They may also establish themselves in organizations and niches that will later become the center of their new business activities.
The expectations of the position are defined by productivity and the quality of work. Service advisors are often measured on how many relationships they handle and the feedback they receive from clients.
Compensation for service advisors is salary‐based and ranges between $55,000 and $88,000.10 The position receives incentive compensation between $7,000 and $16,000. The wide range of salaries reflects a similarly large range of responsibilities. Professionals at the top of the scale are highly capable of working independently and may have more than a few client relationships where they serve as lead advisor.
Promotion to the next position is driven by the service advisor's proven ability to earn the trust and respect of clients and lead client relationships.
Lead Advisor
The lead advisor is responsible for independently managing client relationships and guiding clients through their wealth management, financial planning, and investment decisions. Lead advisors can also be referred to as senior advisors, wealth managers, or senior planners. These are the professionals to whom clients look for guidance. They may get support from other staff, but lead advisors are the ones who have to answer difficult questions.
Additional job responsibilities include training and developing the service team and cultivating new business. According to the 2016 InvestmentNews Survey, lead advisors are typically asked to add $67,000 or more in new client revenue,11 although, admittedly, only 27 percent of firms set such business development goals. Still, even if the goal is not always quantified, the expectation is there.
The lead advisor position is defined by the word relationships. The ability to communicate and empathize with clients is a critical skill. Success is measured by the number of clients served and the associated revenue. The number of clients lead advisors are expected to serve ranges considerably, depending on the type and size of the firm. My experience has been that in multifamily office firms the number of client relationships per lead advisor may be as low as 15 to 20, whereas in a firm more focused on investment advice the norm can be as high as 120 to 150. Client retention is paramount to the success of the position.
Compensation for lead advisors ranges from $120,000 to $200,000.12 There are also considerable incentives ranging between $14,000 and $43,000 that reflect productivity, individual success, and the achievement of firm results. In addition, it is not uncommon for the firm to pay a separate bonus for business development.
In a few firms, the position may bifurcate into two types of lead advisor: (1) service‐oriented advisors with higher productivity goals and lower business development expectations, and (2) advisors who focus on business development, with higher sales goals and a lower service