One of the questions we field on a regular basis is how much should I pay my new hire. In last month’s article, we looked at some pitfalls associated with firms relying on industry salary surveys as a panacea. Below we have provided compensation information on some of our recent placements to hopefully provide additional data points for you to consider when making offers to new hires and/or revisiting compensation with your current team.
The types of firms we represent around the country are very similar in nature. Here is an overview of their characteristics.
- Financial Planning focused
- Boutique in nature
- Serve one or several niche-type clients
- Team friendly culture
- Career path
- Profit margin 15-30%
The positions that we are recruiting for, in terms of roles and responsibilities, are fairly consistent among this group. Here are the commonalities:
- Associate Planner or 2nd-chair support type of role
- Perform all pre-meeting and post-meeting client work
- Hired as W2 employees of existing RIA
- 0-5 years of work experience
- Usually paid a salary range of between $40-80k, $40k for a new college grad type and up to $80k for a CFP Certificant with < 5 years’ experience
- Not required to bring in business (at least not in the initial years)
Here are some examples of firms that made competitive offers which candidates accepted. Keep in mind, this is cash compensation data only, and it is assuming a retirement plan such as a 401k with a 3% match and health insurance coverage where the employer pays for 50% or more of the premiums.
North Carolina – $200 million AUM firm offered CFP with 3 years of experience $58k plus up to 12% of base pay in incentive compensation.
Washington DC - $1 billion AUM firm offered CFP with 3 years of experience $60k plus bonus based on proprietary formula, but estimated to be up to 33% of base after 1 year tenure.
Northern New Jersey - $125 million AUM firm offered candidate with 1 year experience who passed CFP exam $64k, plus $5k bonus.
San Francisco, CA – $1.2 billion AUM firm offered CFP with 3 years of experience $75k, plus bonus opportunity of up to 10% of base.
Northern California – $160 million AUM firm offered candidate with 2 years of experience $73k plus $10k bonus.
Houston, TX - $150 million AUM firm offered CPA with 4 years of audit and no financial planning experience $75k plus $5k increase upon successful passage of CFP exam.
Atlanta, GA - $250 million AUM firm offered new college graduate $40k base plus $3k signing bonus, $2,500 bonus for passing licensing examinations, and 10% annual increase in base comp for 2018 and 2019.
Ohio - $300 million AUM firm offered new college graduate $42k, with an increase to $45k when CFP exam successfully passed, and $53k when eligible to use CFP certification achieved.
In most markets throughout the country firms can expect to pay $40-60k for a new college graduate from a CFP program, $55-70k for someone with a few years of experience, and $70k + for a CFP®. Competitive markets like New York, Washington DC, San Francisco, and Chicago can experience significant spikes in what it takes to secure a hire, due to high cost of living, internal competition from other planning firms, and external competition from industries that pull from the same talent base. Even if your firm is not in one of these areas, it is prudent to consider what other professions (fintech, accounting, mortgage, etc.) are offering in your area.
Here are some examples of firms, not necessarily represented by us, we know of that had offers rejected because they did not make competitive offers.
Indiana – $150 million AUM firm offered a CFP with 3 years of experience $53k.
Phoenix, AZ - $225 million AUM firm offered a new college graduate $39k.
San Francisco, CA - $500 million AUM firm offered a CFP with 3 years of experience $60k.
Alabama - $200 million AUM firm offered new college graduate $35k.
Realize that once your firm develops a reputation for coming in low on compensation, which could happen only after one instance, it is difficult to recover – new hires, and students in particular, do talk to each other – so please use caution when “trying to get the candidate for as low as possible” by making low-ball offers that you hope might stick.
To give your firm, the best shot at landing your ideal candidate, start with an average or slightly above average base compensation, and build in several incentive pieces to encourage them in the direction of what you need done the most! The candidates that we tend to work with aren’t necessarily interested in the highest cash compensation offer, but the best opportunity for growth so structuring your offer to include various step ups so they can see where they will likely be if they deliver, is a key component to securing talent in a very job seeker friendly job market. We have seen prices for solid financial planning talent skyrocket in recent years so if you are planning to make your next hire know that it will likely cost you more the longer you wait.