Financial Advisors

Are You Using the Right Compensation Model for Your Advisors?

C2P Enterprises

Recruiting top-quality financial advisors for your business is similar to acquiring a new high revenue client. It requires that both parties determine whether they are the right fit.   

Compensation is one of the main drivers for top performers to decide which firm they will choose. While some firms adopt an eat what you kill mentality entirely driven by the revenue generated by the individual advisor’s book of business, other compensation models work to establish growth in more than just a financial sense.    

With the state of the current market, where the number of vacancies at firms exceeds the number of financial advisors looking for new opportunities, firms must work to ensure they stand out above the rest.   


While there is no perfect model for compensating financial advisors, there are options compensation models that help attract, retain and incentivize top advisors.  

The first question you should ask yourself is: what type of talent are you hoping to attract with this new compensation model?  

“Are you building a lifestyle business or are you building a legacy?”  

Jordan Harton, Founder & CEO of RISE  

Do you want to bring on hunters who will focus on business development efforts and finding high-net-worth clients?  


Do you need someone to cultivate your existing business and build out those long-term relationships while you act as the rainmaker? 


Traditionally financial advisors have been compensated with a percentage of revenue generated from the client, also known as the grid method.   

While this was the standard for many years, this model has created a lack of vested interest in the firm’s profit, with advisors concentrating only on their book of business.  


Secondly, the compensation model offers a base salary and quarterly stake of company profit.   

This model creates a vested interest in the firm’s profit rather than an individual advisor.  

While the model does show less turnover, there is usually a lack of immediate gratification due to the quarterly structure.   


More recently, many firms have adopted a hybrid compensation model, which offers advisors a base salary, quarterly stake, and monthly variable commission similar to the grid method but only on new revenue produced.    

This model helps to motivate business development and encourages collaboration between advisors, paraplanners, and client service associates.   

When choosing the compensation model you will employ at your firm, remember the model you decide to implement needs to encourage the behaviors you are looking to cultivate. To remain competitive, employers need to analyze their compensation model and ask what behaviors the model looks to reinforce. When companies use an effective compensation structure, it ensures continued company culture and revenue growth.

Originally published on C2P Enterprises.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

C2P Enterprises

C2P Enterprises is a holding company comprised for four distinct brands, each designed to simplify financial planning for advisors and the clients they serve.

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