Top adviser Q&A: Zachary Abraham

A look at how one firm evaluates staff performance, determines salaries, and distributes incentive pay

Nov 28, 2012 @ 12:01 am


Zachary Abraham is chief human resources officer for McKinley Carter Wealth Services in Wheeling, W.Va. He discusses the firm's new process for evaluating staff performance, how it determines salaries and why basing short-term incentive pay on achieving specific individual metrics can improve the overall performance of the firm.

What is the review process like at your firm? Does it continue throughout the year or is it done at the end of the year?

We embarked on a new program in 2012 where we hold biweekly performance meetings focused around specific metrics for the roles of each individual. The meetings are geared toward what's driving the business. So, for instance, a support person may have a metric tied to the support process for the adviser. Advisers may have a target for gross new business. And the firm goal is to bring in X amount of new business. We also conduct two semiannual reviews where we look at the whole year in terms of performance. Sometime in January, we will wrap up the review process for the second half of 2012.

Why did your firm decide to implement a new review process this year?

We worked hand in hand with Scott Ferraro's firm (Pepin Consulting) and decided to structure a short-term and long-term incentive plan. The short term revolves around how you manage performance so they can achieve their goals; you can't set insurmountable goals or else the program fails. We needed some structure, and so the way we had those conversations is, we directly linked to how each department and team operates around the greater firm. As a best practice, we decided we should have biweekly meetings, but at some point in time, they could be triweekly.

Does the staff seem to appreciate this new process where the reviews are more frequent?

Well, our biweeklies are more like check-ins; we are helping to guide them and get them focusing on the right things to achieve those metrics. We designed those to look at what resources you may need and to get the resources to help you achieve those goals. From a managerial perspective, it's hard to remember a whole year of accomplishments or failures. But I think the staff is appreciative of it and see the incentive of it. It gives everyone a more intense focus on what's really driving this organization. Each employee has no more than six metrics, and most have four or five. We use both financial and nonfinancial metrics, and the goal is to keep the performance of the firm very high.

What bonus payout structure does your firm use?

We have the short-term incentive plan, which means we don't give out ad-hoc bonuses. We feel like this has less subjectivity and more objectivity. There's a performance benefit to this, but also, from a risk management perspective, it protects you from questions about why bonuses were given to some and not others. The short-term incentives capture metrics and weight metrics, and the bonus will be a percentage of your base salary. We work that into budgetary process as well, and the bonus will be between 20% and 30% of the base compensation for an adviser.

So if an adviser is making $100,000 as a base salary, for instance, the bonus could be $20,000. It all depends on how much they accumulate in terms of the metrics. A part of it is also tied to the overall performance of the firm. It could be 20% tied to the firm and 80% to the individual. So if an adviser hits it out of the park and hits all the metrics, but the other advisers don't perform as well, the adviser won't get the portion of the bonus tied to the firm. So in this example, he or she would get $16,000, but not the other $4,000 of the bonus. In 2013, we are looking to expand those metrics which could be tied to a specific team or department or geographic region.

What was the review process and bonus structure like before you implemented this new program?

We had annual reviews and periodic check-ins, but they weren't built into any plan. We did have some formality around that, but it just wasn't as structured. Advisers got paid out quarterly bonuses based on gross new business, but we didn't see the results we wanted to there. There were also ad-hoc discretionary bonuses given out typically at year-end. The problem is that there really wasn't any synergistic way for people to realize how their contributions were being recognized. A client coordinator that supported [an adviser's] efforts didn't get rewarded for that, so he may say, “I'm doing a lot of this work to free you up to do your work, and why am I not getting a bonus?” It created some silos. But now there's incentive to how the adviser does for the client coordinator. Also, we're starting to have broader conversations around the firm goals and what that means to each department, and so they can prioritize what's important to meet the firm's objectives and their own individual objectives.

How does the firm approach its annual salary planning?

We take a look at base rates and wage scales biannually to make sure they are competitive in the marketplace. Compensation is partly tied to base salary, and the other part of that is the short-term incentive component. The STI is based on performance, so there is compensation at risk. That means the base has to be adequate enough or you can't stay competitive. But when you take the base and then add the STI portion, if the firm does well, that STI can put you over 100% for the year. You don't want it too low or too high, because if it's too low, you won't get the right people, and if it's too high, you may not have the ability to change [performance]. You have to have a solid-enough base to where if you're moving from another firm, it makes sense to do that. The STI variable is also tied to what role you have in the firm. Someone in sales would have a higher percentage of compensation tied to STI than an administrative assistant. We look at the influence someone has on the performance of the firm and arrive at a certain percentage level.


What do you think?

View comments

Recommended for you

Sponsored financial news

RIA Data Center

Use InvestmentNews' RIA Data Center to filter and find key information on over 1,400 fee-only registered investment advisory firms.

Rank RIAs by

Upcoming Event

May 31


Spring Excell—Peak Advisor Alliance

Members of the InvestmentNews Research team will be presenting new adviser benchmarking data and providing strategies that can help accelerate the growth of your business. In this exclusive three-hour workshop, InvestmentNews will... Learn more

Latest news & opinion

The appeal and pitfalls of holding unconventional assets in retirement accounts

While non-traditional asset classes held in individual retirement accounts may have return and portfolio diversification benefits, there are "unique complexities" that limit their value for most investors.

Wells Fargo's move to boost signing bonuses could give it a lift

Wirehouse is seen as trying to shore up adviser ranks that took a hit after banking scandal

New Jersey fines David Lerner Associates for nontraded REIT sales

Firm will pay $650,000 for suitability, compliance and books and records violations.

Report predicts $400 trillion retirement savings gap by 2050

Shortfall driven by longer life spans and disappointing investment returns.

Wells Fargo will ramp up spending to lure brokers

Wirehouse, after losing 400 brokers in first quarter, is bucking trend among rivals who have said they are going to cut back on spending big bucks recruiting veteran advisers


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print