Practice Management

Must you, should you, pay your interns?

Most advisory firms pay summer interns, but those that don't say the experience is still worthwhile.

Firms offering unpaid internships this summer may be standing in murky waters.
Several unpaid interns have sued large companies such as 21st Century Fox and Viacom Inc. in cases that are winding their way through federal courts. Also, some cities like New York and states including California and Oregon have moved in the past year to boost protections for all interns.
“We encourage advisers to avoid potential problems and pay people, and it’s not just a legal thing,” said Jon Yankee, principal at Fox Joss & Yankee. “If they are good-quality people, they deserve to be paid and to be given a good experience.”
Mr. Yankee, whose firm published a white paper on adviser internships in 2011, said he thinks most advisory firms are paying their interns. He said more college students are expecting to get paid, in part because schools are teaching them that their time is valuable.
“We have always paid interns for their time and believe the compensation is one way to attract quality people,” Mr. Yankee said.
Even social science research is lining up against unpaid temporary positions meant to offer students experience or exposure to a career.
A National Association of Colleges and Employers survey last year concluded that about 37% of those who worked as unpaid interns landed full-time job offers, nearly the same as the 35% of those who never interned at all. In contrast, 62% of those with paid internships found jobs, the survey found.
Financial adviser Gregory Sloan, president of Daniel Advisors, said only one of eight interns he has hired over the past seven years was unpaid. In that instance, five years ago, the student approached him after he had already hired two others and the student needed an internship that summer to fulfill graduation requirements.
“He didn’t provide me much value, but I helped give him some exposure to a small RIA firm,” Mr. Sloan said.
About 43% of advisory firms that participated in the 2011 InvestmentNews/Moss Adams financial performance study hire interns. About 88% of those firms pay them, the survey found.
Mr. Sloan said he believes paying interns “is the right thing to do” and that hiring interns allows him to evaluate someone’s skills and work habits and potentially consider them for permanent employment.
Financial adviser Gail A. Fialkow, an owner with Pegasus Financial Group, said her firm doesn’t pay their interns but does give them a $500 “bonus” at the end of the 12-week internship, basically to cover their gas money.
The intern hired each summer by her firm, which includes three advisers, isn’t asked to do any filing or other administrative duties, she said. The firm’s interns sit in on client meetings and get “practical experience,” she said.
“We don’t pay, but we spend a lot of time with the interns that we could be spending on client activities,” Ms. Fialkow said. “I think they’re getting a better education because they are getting real on-the-job training.”
In 2010, the Labor Department set wage-and-hour guidelines to help employers determine whether an internship is compliant with regulations. They spell out that it must be for the benefit of the intern, be similar to training that would be given “in an education environment” and that the employer can’t derive immediate advantage from the intern’s activities — “and on occasion its operations may actually be impeded.”
Few companies that contact Virginia Tech’s financial planning program about finding interns are offering unpaid positions. Paid interns typically receive $10 to $12 per hour, although some firms pay $15 to $20 per hour, said Ruth Lytton, director of the Virginia Tech program.
“With firms seeking unpaid interns, I raise the question of pay and the Department of Labor rules,” Ms. Lytton said. “I also mention working with students who are projecting $800 or more in monthly student loan payments and how, in good conscience, I could not promote unpaid internships that contribute to that problem.”
Luke Dean, William Paterson University’s financial planning program director, said the school receives so many paid internship opportunities for students that he doesn’t forward unpaid positions to students.
He lets those employers know that the program’s students “don’t do unpaid internships.”