Knowing what to pay a newly hired adviser, paraplanner or client service rep requires advisory firms to use many sources to get the salary right for what a new hire should earn.
Those resources include discussions with local firms, an analysis of broker-dealer studies, a review of industry benchmarks, as well as a study of broader salary websites like Payscale.com, to make sure new employees are making a fair salary for their role in that given locale, experts said.
"You have to get it right; you are dealing with people's lives here," said Mary Dunlap, an adviser pay consultant. "If you make a wrong decision and increase the wages someone is paid beyond the right range, it can hurt the business."
At the same time, paying an employee too little can set that person up for financial stress that will come back and hurt their job performance, and may lead to turnover in the position, she said.
The importance of asking similar local firms about the compensation levels of different roles in their practices can't be overstated, Ms. Dunlap said. That information needs to be evaluated, as well.
Those discussions should include in-depth questions about the duties and skills their professionals in a particular role provide, as well as a review of their initial pay and how that has changed over time.
Advisers need to recognize there will be times when a particular firm may be overpaying employees for a particular reason, she said.
(More: Special Report: 2015 InvestmentNews Adviser Compensation and Staffing Study)
LEARNING THE ROPES
Some firm owners may feel blessed by their success and want to share the wealth. In one case, however, an adviser was paying a 20% to 30% premium for a role because of a "pain factor," Ms. Dunlap said.
The time learning the ropes at this particular firm was decidedly unpleasant, as it included many extra tasks. Moreover, the adviser this new hire was supporting had a personality that "wasn't all that wonderful," she said.
Talking with nearby firms provides invaluable guidance on the local salary scene, as well as information that reflects current market conditions, in terms of competitiveness.
Industry surveys such as the InvestmentNews Adviser Compensation and Staffing Study, as well as Financial Planning Association data, are another important tool in crafting an employee's salary range, she said.
For instance, the 2015 InvestmentNews survey reported the median lead adviser salary in 2014 was $115,000, with half of all advisers earning between $100,000 and $192,000.
Those earning the higher salaries typically reflect people who have been working in a position for a long time, Ms. Dunlap said.
Often, pay data for technical and support positions vary more widely than with adviser positions, she said.
Firms also need to look at Payscale.com, Salary.com and other such pay websites because those are places incoming candidates are looking for guidance on what to expect in different roles, Ms. Dunlap said.