Adding the Associate Advisor Position

Transcription

1 Adding the Associate Advisor Position Important Information This material is designed for a financial professional audience, primarily registered investment advisors. This brochure is published by for informational purposes only and should not be construed as legal or professional advice. disclaims any loss or liability that is incurred as a consequence, directly or indirectly, from the use or application of this publication. Access to Roadmap is provided by as a service to independent advisors using the brokerage, execution and custody services of. TD Ameritrade does not guarantee nor is it responsible for the completeness or accuracy of the data provided by third-party firms or for the quality of any third-party firm s product or service. TD Ameritrade and ActiFi, Inc. are separate, unaffiliated companies and are not responsible for each other s services and policies. TD Ameritrade, DISC and Kolbe are separate and unaffiliated companies and are not responsible for each other s services and policies. Third-party articles and information are obtained from sources deemed reliable; however, TD Ameritrade does not guarantee their accuracy or completeness and makes no warranties with respect to results to be obtained in reliance thereon. TD Ameritrade does not make recommendations or endorsements for any advisor that utilizes its brokerage or custodial services. TD Ameritrade does not monitor, and is not responsible for, communications between advisors and their clients. TD Ameritrade expressly disclaims any warranty or merchantability of fitness for a particular purpose, use or application and assumes no responsibility for any action the recipient may take (or fail to take) based on information contained in this guidebook. Neither this guidebook nor any recommendation made in it constitutes legal or regulatory advice. TD Ameritrade, Inc. and the aforementioned third-party companies are separate unaffiliated companies and are not responsible for each other s services or policies. All product and service names are property of their respective owners. TD Ameritrade and FA Insight are separate and unaffiliated, and are not responsible for each other s services or policies. FA Insight is a third-party provider in the Affinity Services Program. Access to Affinity Services Program vendors is provided solely as a service to financial advisors using the brokerage, execution and custody services of TD Ameritrade Institutional. These services are offered at a discount directly through the participating vendors. Participating vendors are independent and are not employees or agents of TD Ameritrade. TD Ameritrade does not guarantee nor are they responsible for the quality or accuracy of any vendor s product or service. In no instance should the listing of a vendor be construed as a recommendation or endorsement by TD Ameritrade. Furthermore, TD Ameritrade does not recommend or endorse any security described by any vendor., Division of TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank TD Ameritrade IP Company, Inc. All rights reserved. Used with permission. Breakout Growth: Adding Key Positions to Unlock Growth Potential Guidebook tdainstitutional.com TDAI X

2 Table of Contents Introduction...iii Considering the Addition of a Breakout Growth Hire...1 What Is Motivating Your Growth Strategy?...1 Transforming Your Organization to Achieve Growth...3 Does Adding an Associate Advisor Make Sense?...6 Determining the Right Time to Hire...8 Time to Hire: Defining Roles and Responsibilities...11 Determining Compensation and Assessing Affordability...13 Benchmarking Compensation...14 Setting Goals and Considering the Intangible Benefits...18 Sourcing and Onboarding Your New Hire...19 Your Ideal Candidate...19 Onboarding...22 Optimizing the Associate Advisor Position Within Your Firm...23 Transitioning Responsibility and Proper Delegation Strategies...23 Ongoing Professional Development Support Summary...30 Appendix Resources...42 About the Authors...43 Acknowledgements...44

3 Introduction AT A GLANCE Growth it is the primary area of focus for the vast majority of advisory While there are many roles one can add to an advisory firm poised for AT A GLANCE firms. In fact, 80% of firms report strong growth aspirations. 1 Advisors growth, few have a bigger impact than the associate advisor. The associate pursuing accelerated growth often cite the ability to better meet client needs as a primary motivator for growth. Firms recognize that growth provides an opportunity to offer their clients more specialized expertise, advisor, sometimes referred to as a junior advisor, typically focuses on client retention in collaboration with a lead advisor. The position allows the lead advisor more opportunity to develop new business and oversee the Firms with an Associate Advisor customized advice and improved service delivery. firm s most valued client relationships. The value of the associate advisor position is compelling. Research shows that the existence of an associate Multiple levers are available for achieving the growth needed to advisor correlates strongly with higher productivity, stronger growth and This guidebook will discuss: accomplish these objectives. Few, however, are as powerful as human greater income all characteristics of a firm that is building enduring value. How the associate advisor capital practices; in particular, knowing which positions can best drives growth accelerate growth and when to add them. Such strategic additions can This guidebook, part of the Breakout Growth: Adding Key Positions to The right time to hire help a firm avoid plateaus in its growth rate as well as better manage Unlock Growth Potential program, is designed to help you understand Defining the role growth when the pace becomes too rapid. the value of the associate advisor position and how it can help drive Determining compensation sustainable long-term growth for your firm. It is best suited for firms that Assessing affordability are experiencing significant growth and where the lead advisors or firm Recruiting and onboarding owners are at or over capacity from a business development and client Report 44% greater income Optimizing the role over time service perspective. This guidebook can also provide important insights per owner and experience a for firms that have already made the investment in the associate advisor 15% faster client growth rate. position, but have yet to realize the position s full potential. Source: FA Insight, FA Insight, 2012.

4 Considering the Addition of a Breakout Growth Hire Benefits of Growth The potential benefits of growth can be widespread for firms that have the ability to effectively manage new business, clients and systems. Commonly cited advantages by firms experiencing significant growth relate to improved efficiency, profitability and productivity. Other frequently cited benefits are improvement in the quality of the firm s client service and an increase in brand awareness. Figure 2: Actual Advantages of Growth Are Widespread Top Five Positive Impacts of Growth Percentage of Firms Reporting Positive Changes From Growth 1 2 Reasons vary among advisors regarding their growth aspirations, as Productivity Increased outlined in Figure 1, with many of the driving motivators reinforcing each other. That is, by better meeting client needs, a firm will often better meet Quality of Client Service Improved 27 % the owner s financial objectives. Brand Awareness Increased What Is Motivating Your Growth Strategy? Figure 1: Ability to Meet Client and Owner Needs Are Top Motivators for Growth Primary Motivations of Growth Better Meet Client Needs Better Meet Owner and Financial Objectives Cost Savings and Other Efficiencies Better Attract, Retain and Develop Talent Broaden Ownership Succession Options Other Percentage of Firms with Strong Growth Aspirations 11 % Source: The 2012 FA Insight Study of Advisory Firms: Growth by Design. 3 % 19 % 18 % 22 % 27 % AT A GLANCE Assessing your growth motivations Transforming your organization for growth Determining if the associate advisor position makes sense Determining the right time to hire Defining the role Efficiency Increased Operating Profit Margin Increased Source: The 2012 FA Insight Study of Advisory Firms: Growth by Design. 22 % 38 % 36 % 33 % The key, however, to managing growth is preparation. A lack of preparation with regard to people and process can quickly turn growth from a positive to a challenging scenario. Challenges of Growth Growth does not always bring about the expected economies of scale. For some firms, profit, efficiency and productivity all decrease with growth. In addition, client service may begin to suffer under the pressure of firm growth, resulting in a decrease in client satisfaction. While the negative impacts of growth can seem alarming, even off-putting, it is important to note that four of the top consequences are issues related to human capital. While more career opportunities typically result from growth (seemingly a positive), greater management of individuals, their career paths and professional development are required as the firm structure becomes more complex.

5 Figure 3: Unmanaged Growth Can Be Detrimental Thus, taking the time to build a plan has short-term, mid-term, and long-term benefits. Plan to spend some time thinking it through and involve key members of your staff to get their buy-in. The checklist below will help: Top Five Negative Impacts of Growth Percentage of Firms Reporting Negative Changes from Growth Providing Career Paths Is More Challenging Dependency on Key Individuals Increased Technology and Systems Can t Keep Pace Management Capacity Can't Keep Pace Staff Overworked and Stressed Source: The 2012 FA Insight Study of Advisory Firms: Growth by Design. 46 % 36 % 29 % 21 % 14 % 1 Establish a five-year strategic plan. Include aspirations for firm growth, clients, people and operations. 2 Benchmark your firm. Based on current firm size, consider how the firm is currently staffed relative to the industry and how staffing typically changes with firm growth (refer to Figure 4: Staff Composition by Firm Size). 3 Document your current organizational structure. Identify areas where capacity is currently strained and understand why. Look for areas where deeper capabilities are required, where productivity is low, and where greater delegation is needed. Outline job descriptions in writing. If job descriptions exist, take a fresh look to ensure they are reflective 3 of individuals' current roles and responsibilities. 4 The possible negative impacts illustrated in Figure 3, however, should not dissuade you from pursuing a growth strategy. Instead, consider that by growing your business thoughtfully and with a plan in place that considers the human capital impact, you are setting yourself and your firm up for even greater success. In other words, by planning ahead for the challenges and putting the right team in place around an organized structure, you can effectively minimize any negative impact. Your first step as you consider the addition of a breakout growth hire should include a look at your own motivations for growth specifically, outlining where you want to be over the coming months and years. What are you hoping to accomplish? Do you have the infrastructure and human capital resources to get you there? The next section can help you think through your current team and how it may need to evolve to achieve your future business vision. Transforming Your Organization to Achieve Growth Once you ve reviewed your motivations and set your goals, consider the drivers of growth and the challenges specific to your own firm. Then, consider how your current organization and structure can adapt and improve to help you reach your growth goals. Taking these preliminary steps can help you build a comprehensive plan that can effectively take you through the various stages of growth. 4 Consider your ideal structure for the coming 12 months. Consider what must change in order to progress the firm toward its strategic objectives and addresses the challenges previously identified within the structure. 5 Outline your future organizational structure. Similarly, document the structural changes that will need to take place over the next two to three years to best position your firm to achieve your five-year strategic plan. To support the proactive recruitment and the advancement of talent, clarify the key positions anticipated in the future. What key roles will you need to support growth objectives? What will be the priority order in which you add these roles and in what time frame? Establishing good organizational practices can help not just in improving day-to-day office productivity. Firms with a solid model are often best prepared for succession, which is closely associated with firm value. Without a continuity plan for firm management and client care beyond the careers of current principals, a firm will have minimal value.

6 Documenting Your Current Organization As you consider and plan your organizational structure, review Figure 4, which showcases the typical staff composition of advisory firms at different revenue levels. Figure 4: Staff Composition by Firm Size Revenue Range Median Revenue Median Staff $100K-$500K $215,000 2 $500K-$1.5M $875,000 5 $1.5M-$3.5M $2,180, >$3.5M $6,195, Here are some highlights to consider as you determine where your firm s current structure falls and plan your future state: From $100,000 to $500,000 in revenue. The typical firm s staffing composition is simple, usually consisting of a lead advisor (who is also the firm s founding owner) and an administrative assistant. Between $500,000 and $1.5 million in revenue. The firm takes its first steps toward organizational maturity. The firm bolsters its capacity for generating revenue and overseeing client relationships by adding another advisor. Usually this second advisor is at the associate level (second in seniority to the lead advisor). For the first time the firm also adds more junior positions that directly support advice delivery. The first hires in this category are typically a support advisor (similar to a paraplanner in responsibility) or a client services associate. While the firm continues to have one administrative position, beyond $500,000 in revenue the position is often upgraded to an office manager. Approaching $1.5 million in revenue and just beyond. The firm grows its team further and reaches a scale that makes more formal functional divisions possible. This development coincides with a movement away from generalist positions and toward more specialized positions. Perhaps the most significant specialist role to be added at this stage is an Professionals Lead advisor Lead Advisor Business Business executive-level position dedicated to business management, often in the form of an operations manager. Directly responsible Associate Advisor Development Development At $3.5 million in revenue and above. The firm s organizational structure reaches maturity. Technical specialists, who for advice delivery Specialist Specialist may focus solely on financial planning, insurance or estate issues, deepen firm capabilities to deliver to increasingly or business Lead Advisor (2) Lead Advisor (6) development Associate Advisor Associate Advisor (3) complicated clients. Continued growth will demand the continued specialization of roles, including a more specialized management team. At this size, common firm divisions could include planning, investments, client service, operations, 5 Management Operations XChief X Executive and administration. The firm s greatest organizational challenge at this stage is managing a more complex organization Majority of time Manager Officer (CEO) is dedicated to Chief Operating and providing all team members clear paths for progressing and developing within the firm. 6 management of the Officer (COO) business Operations Manager Technical Specialists Support service delivery in specialist capacity Support Staff General advisor support with limited client contact Administrative Staff Non-management roles that support the firm at large Administrative Assistant Support Advisor or Paraplanner Client Services Associate Support Advisor or Paraplanner Office Manager Client Services Associate Office Manager Administrative Assistant Receptionist Financial Planning Specialist Senior Portfolio Manager Senior Research Analyst Support Advisor or Paraplanner (3) XSenior X Portfolio Administrator XClient X Services Associate (3) Administrative Assistant Executive Assistant Technology Support Receptionist Does Adding an Associate Advisor Make Sense? You ve assessed your goals and created a plan for your firm s future state. Consider the following as you determine if it is time to expand your team: Lead advisor workload. A lead advisor with strained capacity may seem like an obvious sign of need, but not necessarily. If the issue is simply more high-quality clients than the lead advisor can handle, another hire at the same level may be in order. An associate advisor, however, can be an appropriate solution if the lead advisor is overburdened by smaller clients that a less experienced advisor can serve. The firm may need to look in yet another direction if the lead advisor is distracted by business management issues or client administrative needs. Utilization of support staff. Support staff capacity and utilization will provide further indications of need. If support advisors or client services associates are at capacity with administrative tasks and there is no further potential for the lead advisor to delegate to them, the associate advisor position may deserve consideration. Client service quality. Deteriorating client service quality can be another key indicator that more help may be needed in the form of an associate advisor. Signals can come in the form of client disengagement, service delays or errors in completing work for clients. Breakout Growth Human Capital Assessment Source: FA Insight proprietary survey data. Leverage this assessment to understand your motivations for growth, identify human capital challenges, and access peer benchmarking data related to staffing and compensation. This tool is designed to provide guidance on how to best position your firm for significant growth through making strategic hires, specifically the associate advisor and dedicated manager. To access the assessment, visit: tdai.actifi.com/humancapitalassessment.

7 7 The performance advantages an associate advisor is designed to bring can be significant. The position correlates with clients and assets under management. 2 significantly greater measures of income, higher productivity and stronger rates of growth advantages that correlate with During the most recent two-year period leading up to this comparison, 8 a firm that is effectively building value. Growth the rate of client growth was 15% faster for firms with the position relative to those without. 2 Here s how adding the associate advisor position can benefit a firm: Assets under management grew at a 6% faster rate during the same period. 2 Frees up lead advisor s capacity. Lead advisors are more capable of focusing on where they can add greatest value to the firm. With an associate advisor on the team, the lead advisor can delegate more routine client management tasks and spend more time nurturing the highest value client relationships. Determining the Right Time to Hire Improves short-term growth prospects. The lead advisor can more readily focus on new business development, Clearly, an associate advisor can add important value for a firm. Getting the most from the position, however, depends heavily with the associate advisor initially focusing on serving clients and eventually generating additional business from on making the hire at the right time. A premature addition risks incurring additional labor expenses that the current revenue existing relationships. stream cannot support. Waiting too long may result in deteriorating client service and lost opportunities for growth. Supports long-term growth prospects. Over time, the associate advisor, mentored by the lead advisor, can assume greater responsibility for new business development and further deepen the firm s capabilities for growth. Additionally, the associate advisor offers a less expensive reserve capacity, enhancing the firm s ability to capitalize on emerging growth opportunities. Improves client experience. The associate advisor s ability to collaborate with the lead advisor to service relationships $3.5M+ provides redundancy that ensures continuity of service and improves quality of service by lessening chances of overlooking client needs. Four of five firms with revenue greater than $3.5 million employ an associate advisor. Provides a career path. Adding a middle tier advisor bridges the traditionally wide skills gap between the lead advisor and client services staff. This bridge, in addition to further reducing dependency on the lead advisor, forms a natural career path that facilitates the retention and development of employees. A potential successor. Options for client succession, management and ownership improve with the addition of the associate advisor role. The new role completes a career path and helps to create a natural pipeline for developing and grooming a successor. How the Associate Advisor is designed to drive growth The associate advisor is one of three professional positions that can exist within an advisory firm. The other two are the lead advisor and business development specialist. All three are considered professionals since they have direct influence on revenue generation, either through developing new business or managing client relationships. Key responsibilities of the associate advisor position: Fully accountable for client retention, handling day-to-day client management and advice delivery for clients Primary manager of less complex client relationships, which are typically transitioned from the lead advisor Lead review meetings for low- and medium-complexity clients Identify new advice needs of existing clients Coach and mentor support advisors and client service staff For the associate advisor, the emphasis is on managing existing client relationships, although accountability for business development may increase the longer an individual is in the role. The associate advisor typically assumes much of the accountability for client retention, freeing the lead advisor to focus on new business and maintaining only the most complex and highest value client relationships. Income Productivity Income Income per owner for firms with an associate advisor was 44% greater relative to other firms. Median total owner income was 64% greater. 2 It should be noted that overhead expense is 9% higher for firms with an associate advisor; however, operating profit margin is 16% (nearly 3 points) higher, which demonstrates some justification for the added spend. 2 38% greater profit per client combined with a notably better ability to control overhead expense helped to drive the profitability advantage. 2 Productivity Firms with the associate advisor position enjoyed a productivity advantage, resulting in a 4% greater edge in revenue generated per team member. 2 Growth Firms with an associate advisor achieved higher rates of growth for both 2 FA Insight, 2012.

8 goal of having the current 9 10 advisors reach 100% capacity Note: Professionals are defined as having direct influence on revenue generation, either through developing new business or managing client relationships. right as the new individual finishes onboarding. Percentage of Firms with Support Positions TIP Monitoring Capacity and Planning Ahead At Prestige Wealth Management, the firm is always planning for growth, according to Steven Fox, Director of Client Relations and Communications. Given the time required to bring on a new advisor, Prestige likes to maintain advisor capacity at around 85%. As capacity approaches 95%, Prestige begins to search for an additional advisor, with the While every firm s needs are unique, a look at industry norms may help you narrow the range for when it may be appropriate to bring on an associate advisor. Figure 5 indicates that by the time a firm reaches $500,000 in annual revenue it will likely employ at least one associate advisor. Four of five firms maintain the position beyond $3.5 million in revenue. For additional perspective, Figure 5 illustrates the number of firms employing a support advisor or technical specialist of any type positions that round out a more comprehensive advice team. The support advisor supports more senior advisors in preparing financial documents, business development and contributing to improving efficiency within the team and generally do not manage client relationships. Technical specialists usually have a singular focus such as financial planning, insurance or estate issues. Directionally, these positions follow a similar trend as firms grow. Figure 5: More Than Half of Firms Employ an Associate Advisor by $500,000 in Revenue Percentage of Firms 90% 80% 70% 60% 50% 40% 30% Figure 6 provides additional quantitative benchmarks that may suggest the time is right to hire an associate advisor. Figure 6: Benchmarks Supporting Associate Advisor Hire Indicator Revenue per Professional Threshold Suggesting Position May Be Warranted Possible Interpretation >$600,000 Existing advisors may be overworked, with little free capacity for additional clients or business development. AUM per Professional >$90 million Existing advisors may be overworked, with little free capacity for additional clients or business development. Ratio of Non- Professionals to Professionals >2:1 Firm may have maximized the value of non professional leverage an associate advisor may create more impact than additional support. 20% 10% $100K $500K $500K $1.5M $1.5M $3.5M >$3.5M Gross Annual Revenue Associate Advisor Technical Specialist (General) Support Advisor Source: The 2011 FA Insight Study of Advisory Firms: People and Pay.

9 Time to Hire: Defining Roles and Responsibilities When you have determined that it s the right time to hire an associate advisor, your next step is to think about how the role will be structured within your organization: What will the role be expected to accomplish? What specific activities will the individual in this role be expected to perform? Who will the role report into? By fully defining the role, you can increase your chances of sourcing the best candidate for your firm. Figure 7: Example Advisory Team Structure One of the most frequent mistakes in the hiring process is moving forward with sourcing candidates for a role before you have fully defined the role and its associated responsibilities. It is important to convey a detailed description of what is needed to perform the position well within your firm. Consider the following as you craft your detailed job description: Responsibilities. What specific activities will this individual be expected to perform on a daily basis to support the lead advisor in managing client relationships, supporting revenue generation, etc? Qualifications. Determine the skills, education, and/or experience needed to effectively do the job. Behavior. Strong verbal and written communication skills, extroversion, excellent problem solving, and active listening are all examples of behaviors you may wish an associate advisor to exhibit. You should define as many qualities as possible for a person to succeed in the position. Motivation. What type of individual will be successful in your work environment? What drives them to succeed? As you think about the job description, consider that the associate advisor position is a support role to the lead advisor, New Client Acquisition Client Retention primarily responsible for the retention of existing client relationships. The position requires an individual who has a thorough knowledge of the financial services business and who is committed to being part of a team that delivers a comprehensive client solution. This individual must have strong relationship management skills. They must be reliable, 11 organized and deadline-driven. A qualified applicant must be dedicated goal-oriented, and able to work well in a self-directed and collaborative environment. 12 Lead Advisor Associate Advisor Support Advisor Appendix A Appendix A: Sample Job Description: Associate Advisor additional background and typical expectations with regard to this position. As you work through role creation and developing the associated job description, it is also important to consider the financial implications of your decision to add an associate advisor. The next section will present industry benchmarks regarding compensation and an exercise to assess the affordability of the position given your firm s current financial situation. Case Study: An Emphasis on Specialization Client Services Associate Over the last seven years, The Colony Group has experienced a new level of growth, roughly doubling the number of clients it serves and tripling its assets under management. The firm s ability to successfully accommodate growth was not an accident; a conscious decision was made to be more deliberate and strategic about organizing its people. A key aspect of growth was developing people into specialists. As CEO Michael Nathanson states, We discovered that we could be more efficient and more effective with a clearer personnel strategy. Now we have management personnel that run the business aspects of the business so wealth managers can be wealth managers and investment managers can be investment managers. To download the full case study, visit tdainstitutional.com/breakoutgrowth.

10 Determining Compensation and Assessing Affordability Benchmarking Compensation When compensation is managed strategically it can help attract and retain talent, as well as boost financial and operating performance. As you determine your compensation philosophy for the associate advisor position, consider the following: Compensation Considerations Aligning cash compensation with your firm s strategic objectives Reinforcing the compensation plan with benefits Implementing professional development and retention initiatives to complement the overall strategy Figure 8 provides an overview, based on national aggregates, of what firms can expect to pay an associate advisor. 13 AT A GLANCE As important as understanding if it s the right time to hire is assessing if you can afford to bring the role on at this time. Without careful planning 14 and an understanding of the initial economic impact, the benefits of the role could be eroded and may pose a financial strain on the firm. Lower Quartile Median Upper Quartile Benchmarking compensation Economic justifications for hiring (estimating costs) Break-even analysis for the new hire There are three key steps to assessing affordability: Benchmarking compensation Estimating the total position cost Projecting break-even revenue By following these steps and using the worksheets associated with this guidebook, you may be able to better determine your compensation philosophy with regards to the associate advisor position, understand the full cost of maintaining the role, and develop a plan for recouping the cost of the hire over time. Figure 8: Typical Compensation for an Associate Advisor Associate Advisor Base Salary $64,818 $83,882 $98,044 Variable Compensation $6,536 $11,438 $21,788 Total Compensation $72,988 $95,865 $114,384 Source: The FA Insight Study of Advisory Firms: People and Pay Compensation Update for Appendix B Appendix B: Assessing Affordability Worksheet provides a detailed worksheet designed to help you understand your compensation philosophy, estimate the total position cost, project the needed revenue to break even on this role, and the role s potential contribution to overall firm growth over time.

11 Estimating Total Position Cost The cost of a new position includes cash compensation for base salary and incentive pay as well as non-compensation expenses such as insurance premiums, retirement benefits, payroll taxes and professional development expenditures. FA Insight survey data reveals that for every dollar paid in base salary and cash incentives, the average advisory firm also spends about 15 cents for non-compensation expenses. Using this factor, Figure 9 illustrates typical total employment costs for associate advisor by lower quartile, median and upper quartile compensation targets. Figure 9: Total Projected Employment Cost for an Associate Advisor Figure 10: Example Calculating Additional Revenue Needed for an Associate Advisor Firm Financials Prior to Hire After Hire of Associate Advisor Revenue $2,000,000 $2,137,251 Expenses $1,600,000 $1,709,801 Operating Profit $400,000 $427,450 Profit Margin 20% 20% Lower Quartile Median Upper Quartile Total Compensation $72,988 $95,865 $114,384 Non-Compensation Expense $10,610 $13,936 $16,628 Additional Revenue Needed $137,251 Source: The FA Insight Study of Advisory Firms: People and Pay Compensation Update for Total Employment Cost $83,598 $109,801 $131, Additional revenue needed is projected relative to the associate advisor position. In the example presented, the firm pays cash compensation equivalent to the national median of $95,865. The firm must then generate an additional $137,251 in Source: FA Insight based on FA Insight proprietary survey data, annual revenue in order to cover the cost of a new associate advisor inclusive of non-compensation expenses while maintaining its profit margin at 20%. Projecting Break-Even Revenue Maximizing Investment Return The benefits of the associate advisor role must, at some point, exceed the cost of maintaining it. You will need to The final component of a comprehensive position affordability assessment considers the potential of the new position to consider the additional revenue the firm will need to generate in order to cover the cost of adding the position and either generate additional revenue or improve the firm s ability to control expenses. Ideally the firm s investment in the maintaining your desired profit margin. Then, you will need to determine the time frame for the return on investment so new position creates opportunities for the firm to generate revenue or improve its profitability. Given that it may take that everyone s expectations are in line prior to the new hire. some time to break even on the cost of a new associate advisor, be sure to plan for this added expense upfront and build it into your overall growth plan. For profitability to remain unaffected by the hire, your firm will need to increase revenue or reduce other expenses. Assuming no changes in expenses beyond those associated with the hire, additional revenue required will equal what is To calculate the amount of new assets you will need to break even, or recoup your investment, leverage the following formula: needed to cover the costs of the hire plus an additional factor to maintain the firm s profit margin. The calculation for projected needed new revenue is: New Assets Needed = (New Revenue Needed) / (Return on Assets) New Revenue Needed = (Total Position Expense) / (1 - Desired Operating Profit Margin) Please note the actual adjustment factor will vary depending upon the firm s desired profit margin. Figure 10 provides hiring examples for a hypothetical firm earning $2 million in annual revenue prior to the hire and that wishes to maintain its 20% profit margin.

12 How well you maximize your investment in your new hire ultimately depends on planning: Think about how to best to transition the associate advisor into the firm. Set objectives for how a lead advisor can be more productive as a result of the new hire. Be realistic about the potential of the new position in terms of costs and benefits. Set goals and plan for getting the new hire ramped up to full productivity. Have a clear blueprint for how the lead advisor s time can be productively redirected in light of the new hire. Understand and plan for what is achievable with regard to the additional revenue the firm could realize as a result of the lead advisor s increased productivity. Even with careful planning, the return on your investment can take time there will be a period of transition where the new associate advisor reaches full productivity and existing team members adjust to revised roles. Figure 11 covers the first 36 months of a hypothetical associate advisor hire: Costs and additional revenue needed to preserve the firm s desired profit margin begin in Month 1. Revenue resulting from additional time spent by the lead advisor on business development does not begin until Month 4, once the associate advisor is acclimated and ready to begin assuming client relationships from the lead advisor. Over time, however, the lead advisor is able to transfer an increasing number of relationships. As discussed, key benefits of the associate advisor relate mainly to improving the ability of lead advisors and principals to spend time where they are most effective. A well-thought-out hiring strategy will look beyond the immediate hire and consider a plan for how the new hire will impact the ability of existing team members to make an improved contribution to the firm. Setting Goals and Considering the Intangible Benefits When it comes to break-even analyses, if immediate revenue replacement is absolutely critical, it will be important to set realistic short-term goals that will accomplish the revenue lift needed. It is also important to weigh the emotional benefits that the founders and other staffers might receive from having more freedom to spend time on the things they enjoy doing most. A high-functioning team and exuberant culture are hard to value in dollars and cents but can prove invaluable in achieving breakout growth. The next section provides guidance on strategies for sourcing and onboarding your new associate advisor. By Month 16 the cumulative revenue contribution resulting from the hire surpasses the cumulative revenue required to cover costs and maintain the firm s profitability target. Figure 11: Sample Associate Advisor Position Benefit Analysis Example Position Benefit Analysis $1,000,000 $800,000 $600,000 $400,000 $200,000 $ Month Number Cumulative Revenue Needed Cumulative Revenue Contribution Source: FA Insight based on FA Insight proprietary survey data, 2012.

13 Sourcing and Onboarding Your New Hire that they will have access to including your full suite of products and services, technology resources, professional development resources and any support staff. Research the Competitive Landscape Prior to speaking with potential candidates, you should survey the competitive landscape to understand the supply and demand for associate advisors in your geographic area. The supply and demand for talent will affect the potential candidate pool available to you, the compensation range you will need to target to be competitive, and the amount of time it may take you to bring on the right individual for the role. TIP Remember to refer to your detailed job description as you begin to source candidates to ensure you are only meeting with individuals who meet your ideal candidate criteria. well-trained managers who work full time recruiting the same advisors you AT A GLANCE Your Ideal Candidate want to hire. You may want to consult with a local recruiter to get a better Effective sourcing relies on getting information about your open position view and insight into the competition for associate advisors. out to qualified candidates or to professionals who can recommend qualified candidates to you. Six Key Steps to Help You Source High Performers There are many ways you can source talent, including promoting from within, networking, industry recruiters and referrals. To find the right fit, 1 Always be sourcing. Finding great talent is essential to a thriving business. As Jim Collins notes in his best-selling you must outline your own value proposition to your target audience and book, Good to Great, It s about getting the right people on the bus. Philosophically, you should always be Your ideal candidate determine your interview and screening process. By completing these tasks sourcing for new talent regardless of whether you have an open position. Your value proposition you can position yourself to attract the right candidate for your firm and 2 Be well connected. Often, your best talent will come as referrals through centers of influence (COIs), clients, and Effective interviewing understand how to effectively engage and recruit them. your personal network. Word of mouth can be extremely powerful when sourcing talent. Depending on your techniques network and how public you wish to be with your search, consider posting an open position or solicitation for Onboarding and integrating Your Recruiting Value Proposition talent on your LinkedIn personal profile or company page. into your firm On the surface, many advisory firms seem to have similar client offerings 3 Set up a referral system. Instead of paying an agency, pay your employees a referral fee if they help you find your and investment philosophies. When recruiting an associate advisor, you next new employee. If you use this method, consider withholding payment until the new hire has successfully should be prepared to answer the question, Why us? just as you would completed 3 6 months of employment. when prospecting a new client. You need to effectively convey your firm s 4 Look inside first. Whenever you can, source talent from your existing employees. If you evaluate and develop your differentiators and culture through your brand, team members and senior staff on an ongoing basis, you may be able to promote from within. leaders in order to attract the right candidate for your firm. As you go 5 Use job boards. Many advisors worry that using job boards will result in too many resumes. Many job boards, through the interview process, it is critical to ensure that your ideal such as CareerBuilder or Monster, now allow you to set criteria or questions an applicant must answer in order to candidate s values, motivations and career aspirations match your firm s apply. Also, many job boards allow you to search their databases of posted resumes without posting a job ad. value proposition. 6 Use a recruiting agency. This option is the most expensive but can be the most efficient. Recruiters will pre-screen candidates, ensuring you only meet with qualified individuals. They often offer additional services such At a more tactical level, most candidates will also be interested in learning as background checks and personality assessments, which can aid in weeding out candidates who are not a good more about what resources and capabilities are available to support them fit for your firm. as an associate advisor at your firm. Be prepared to discuss any resources In addition, you should take time to identify who you are competing against for talent in your geographic area and outline your competitive differentiators. What makes you different from them as an employer (e.g., cultural fit, opportunities for growth)? You will be competing with experienced and

14 Interviewing Candidates Interviewing is the next critical step. You will want to be sure you ask the right questions, thoroughly evaluate candidates, and assess cultural fit to avoid a bad hire. Effective interviewing questions and techniques can play a significant role in your ability to bring on the right talent for all positions. Remember, sometimes the way the question is answered is as important as the answer itself does the candidate seem thoughtful, careful, assured and ready to work with clients and represent your brand? Onboarding The onboarding process begins long before the new associate advisor joins the firm and ends once he is deemed fully functional and successfully assimilated into the firm. It includes certain legalities such as background checks and reference checks, and then niceties such as ensuring a proper space, supplies, etc. Preparing ahead of time for a smooth first day can go a long way toward ensuring a smooth first year and beyond and can help a new hire feel immediately at home. You may want to assign someone to take the new hire to lunch the first day; be sure they can get the computer access they need as well as simple things like pens and business cards. Effective Interviewing Techniques and Best Practices Background check: A number of firms can help with this process; requirements differ based on level of client access. Pre-Interview Client communication strategy: Will you include details of the new advisor s availability in a targeted , 21 Prepare, prepare, prepare. newsletter, etc.? Will you alert local press through a simple release? This can be a great communication Review the job description and specific job responsibilities that you created for this opportunity to reach out to your clients. 22 new role. Sample plan for associate advisor: Create your list of questions and what you want to accomplish in the interview; Pre-Day 1 choose questions that will provide insight into their talents for the open position, but Perform due diligence background check also ask behavioral questions that can provide insight about who they are on a Prepare for arrival (desk, technology hardware, address, etc.) Nothing is more frustrating for a new personal level. hire than to spend 3 4 days without a computer, sitting around feeling useless! Be sure to review security procedures laptops must be brought home at night, etc. Leverage the Building High-Performing Teams Interview Guide This in-depth guide offers best practices for interviewing as well as a detailed question bank you can draw from. This guide is available for download at tdainstitutional.com/highperformingteams. Interview The first interview is often best conducted via the phone. If the candidate is not strong on the phone, then you will be able to save time through a quick initial screening. Take good notes throughout each interview so that you can have the information to perform an apples-to apples comparison as you narrow down your field of candidates. Have key team members participate in interviewing any potential candidates to ensure buy-in from all before making an offer. Post-Interview Use an assessment resource prior to making the final offer, such as DISC or Kolbe. This allows an unbiased tool to help confirm that the candidate has both the right skill set for the job and the right chemistry for your existing team. Try to anticipate questions and provide an overview of answers so a new hire isn t left wondering about things such as dress code ( We wear jeans Fridays; it s important always to have a tie and jacket available in case a client visits. ), arrival times, lunch policies ( Most people bring lunch; most people spend 30 minutes out. ), and parking. An informal FAQ document, even if you think certain things are straightforward, may help go a long way to making a new hire comfortable during this transition. Items to Cover Day 1 Welcome Introduction to the firm and staff (consider assigning a buddy for the first week and be clear about who can help with questions on supplies, etc.) Fill out paperwork, sign contracts, etc. Days 2 90 Set goals and define key performance metrics Set up introductory meetings with senior leaders and team members Schedule regular check-ins to monitor transition process and identify any challenges Assign any recommended training (with timelines) to bring them up to speed on: Processes and procedures Technology software Available tools and resources Once you have successfully onboarded your new hire, you must next turn your attention to optimizing the associate advisor position at your firm.

15 Optimizing the Associate Advisor Position Within Your Firm Transitioning Clients to the Associate Advisor Segment Determine Advisor Capacity Identify Clients to Transition Develop a Transition Process Rules of Engagement The Importance of Client Segmentation in the Transition Process An important first step in developing your growth strategy is to understand your clients on an individual basis, the complexity of their financial needs, and their value to your business. With this understanding, you can then determine how best to service those relationships and, in turn, grow your business through retention, referrals and potential development opportunities. Going through a comprehensive segmentation exercise is critical as you onboard an associate advisor. It will serve as the basis for which clients they will interact with, take the lead on from a relationship management perspective, and continue to support the lead advisor. 23 AT A GLANCE In order for your new hire to be a success, you need a plan for integrating For the purposes of identifying which client relationships can be transitioned to your newly hired associate advisor, pay the associate advisor into your firm and your client relationships. close attention to the following: 24 Transitioning Responsibility and Proper Delegation Strategies Revenue. All things equal, the lead advisor will typically want to retain highest revenue relationships. Relationship. Specifically, the degree of difficulty to serve the client, either due to complex needs or a more demanding Once on board, an orderly client relationship transition process can help to nature. All things equal, the lead advisor will tend toward retaining the more complex and demanding relationships. ensure that the new associate advisor is quickly able to contribute to firm Referrals/Future Potential. The need for the lead advisor to continue servicing the client for reasons beyond revenue or objectives. Consider: profits the relationship directly generates. Examples include the client being a relative of a higher value client, a good Client segmentation referral source for more high-value clients, or the client s lengthy history with the advisor and resistance to change. Associate advisor capacity Transitioning responsibility Identifying clients for transition and proper delegation Developing a transition process strategies Establishing rules of engagement Client Segmentation and Service Model Strategy Ongoing professional Review TD Ameritrade s guidebook on client segmentation and service models, which provides a methodology for segmenting development support Each of these strategies is explained in greater depth in the following sections. your clients and creating a client service model that optimizes your current capacity and meets individual needs. It also includes step-by-step instructions on how to use s Client Segmentation and Service Model Tool to help you efficiently segment your client base and assign appropriate service models. To access these resources please visit Veo>Resource Center>Practice Management>Client Service. To help identify clients for transition, you can also reference the Segmenting Clients for Relationship Transition Worksheet in Appendix C. Determine Associate Advisor Capacity Before you formally identify clients for transition and begin formulating a transition plan, it is imperative that you assess the capacity of the associate advisor at the beginning and as it increases over time. To provide a frame of reference, the typical advisor (across all levels of experience support, associate and lead) manages 59 clients with a median per client AUM of about $900,000, according to a 2012 FA Insight study.

16 25 As a result, the client gains Identify Clients for Transition How long will it take to onboard the associate advisor before the transitions can come into full swing? confidence in working with Now that you have segmented your clients and determined the associate How many transitions per month, on average, are realistically possible based on the associate advisor s capacity? 26 the associate advisor and advisor s capacity to take on clients through the onboarding period and over In which order should clients be transitioned? the associate advisor the long term, apply the segmentation results to determine which enhances his ability to relationships to transition to the associate advisor. In what order will you manage the relationship and begin to transition clients and over what time frame? First priority transitions, Develop a Realistic Time Frame for Transition provide value for clients. for example, could be low- and medium-complexity clients with revenue Use the Client Relationship Transition Time Frame Worksheet provided in Appendix D to help you realistically plan for a smooth Over time, the associate below $10,000 per year. For each relationship, you will need to identify if the transition in your own office. advisor will take full lead advisor will need to remain involved (but in a reduced capacity). responsibility for less complex clients while Develop a Transition Process and Client Case Study: Next Gen Bullpen Creates Leverage continuing to support the Communication Strategy lead advisors with more How you handle the transition process and communication thereof with complex relationships. your clients will have a significant impact on how they view the Donaldson Capital Management (DCM) is an investment management firm where the client is the number one priority. DCM associate advisor and how valued they feel as a client. How will you has experienced strong growth in the last few years, with the most rapid growth occurring in just the last 12 months. In position the role of the associate advisor with transitioning clients? January 2012, the firm surpassed $500 million in AUM and was able to break $625 million in This period of growth What will their future interactions with the lead advisor look like? Once spurred DCM to add five new employees in the last two years, as senior firm management realized that in order to carry you have determined the answers to these questions and built out your the surge of new business, work must be carefully managed as it is delegated to more junior team members. Says firm transition process, confirm the time frame for the transition of President and Senior Portfolio Manger Mike Hull: The firm has changed a lot in the last couple years by getting people to a relationships and track the progress made on a regular basis. As you level where they are more expert at everything they do. That s been exciting to see. begin to transition clients, you may find that you need to adjust your process to minimize client impact or to accommodate the new associate To download the full case study, visit tdainstitutional.com/breakoutgrowth. advisor s learning curve. TIP At Affiance Financial, Seth Meisler describes an approach that has worked smoothly from the perspective of all involved parties the associate advisor, the lead advisor and the client: Initially, associate advisors are brought into a client relationship by the lead advisor in order to contribute subject matter expertise, provide support in client meetings, or assist in servicing more complex relationships. The actual number of clients an associate advisor can manage depends on a variety of factors. In determining a suitable number of relationships for the new associate advisor to manage, consider the following: The associate advisor s skill and experience level The allocation of time that the associate advisor will dedicate to managing client relationships versus administrative or business development activities The size of the relationships to be managed in terms of wealth and assets under management The service complexity of clients to be managed Level of service to be delivered based on client segmentation and service model strategies leveraged by your firm These factors will assist you in determining the number of relationships that any one associate advisor can manage. Note: This may vary based on client type. Key Components of a Client Relationship Transition Plan A smooth transition of clients from lead advisor to associate requires a thoughtful process for how and when each relationship transition will occur. Develop a transition process that clearly defines: Talking points for describing and positioning the role of the new associate advisor and the future role of the lead advisor with the client (What will be different from how they interact with the firm today?). Format for communicating the role change (e.g., client review meeting, phone call, personalized letter, or ). The number of joint client review meetings with both the lead and associate advisors before the associate advisor takes primary responsibility for the relationship. Timing for when the lead advisor will phase partially or completely out of the relationship. Ongoing service standards that the associate advisor must meet (If you have a segmentation and service model strategy for the firm, this may already be defined). Exceptions or circumstances where the lead advisor could be brought back into the client relationship (e.g., client s advice needs increase in complexity). Having a time frame for transitioning relationships is important for monitoring and facilitating progress as an associate advisor comes up to speed. Depending on the number and complex needs of the clients being transitioned, it could be an extended period of time before the transition is complete. As you develop your transition time frame, consider the following:

17 Rules of Engagement for Shared Relationships A critical factor determining the successful transition of client relationships from the lead advisor to the associate advisor is defining how the two individuals will collaborate and interact with transitioning clients. Determine, for example, how you will prepare for the client review meetings and how the follow-up work will be completed. It may take years to fully transition a relationship depending on the length of time you have been working with the client and how quickly they become comfortable with the associate advisor. Developing Your Team An individual development plan can be an effective tool in identifying growth opportunities for your staff, helping to increase their ability to contribute to your firm s overall goals and enhance their effectiveness over time. A development plan template is provided in Appendix F: Sample Professional Development Plan. In many cases, the lead advisor will continue to have at least minimal contact with transitioned clients. In order to provide a seamless client experience, it is important that the lead and associate advisors develop rules of engagement for shared client relationships. Areas where the lead advisor may continue to have a role include: Handling day-to-day client activities Preparing for client review meetings Leading review meetings Completing follow-up work as a result of client meetings Making final recommendations regarding advice needs The development plan needs to detail the what your associate advisor will strive to improve or further develop as well as the how. The how can take a number of forms to facilitate progress on developmental goals. A number of tactics can be employed on a day-to-day basis and can range from low cost and informal to full-blown tuition reimbursement programs and formalized training. As you begin to think about what tactics you will leverage with your associate advisor, remember that training is not enough. Newly gained knowledge is best retained by applying it on a regular basis and imparting that knowledge to others over time. Figure 12: Knowledge Retention Rates by Teaching Method Ongoing Professional Development Support 27 In a study of 1,200 top young managers published in the July August 2012 Harvard Business Review, a career development gap was identified between the support top young managers expect to get from their employers and the actual services Teaching Method Knowledge Retention 28 they receive in the areas of mentoring, coaching, training and support from management. Having made a significant See/Hear Lecture 5% investment in bringing on an associate advisor, you need to ensure you continue to build their engagement and motivation to drive growth for your firm over the long term. One way to accomplish this is to develop a structured career path. A continued Reading 10% focus on professional development can help you maximize the associate advisor s contribution. Audiovisual/Video 20% A Structured Career Path Having made a significant investment in bringing on an associate advisor, you need to ensure that you continue to build their engagement and motivation to drive growth over the long term. A structured career path provides advisors with the opportunity to increase their contribution to the firm and experience upward mobility. Demonstration 30% Discussion Group 50% Practice by Doing 75% Teaching Others 90% To view a sample advisor career path, access Appendix E: Associate Advisor Career Path. Immediate Application of Learning in a Real Situation 90% There are many ways you can provide professional development support to an associate advisor in further developing their skills to better serve clients, enhance their technical expertise, and increase their management and business development capabilities. As they continue to develop over time, so will their ability to generate revenue and release additional capacity from the lead advisor. Professional development begins with a conversation. The following provides a framework for creating an individualized professional development plan. Discuss the individual s strengths and weaknesses Confirm and prioritize development goals Identify development opportunities Develop and commit to a plan to achieve those development goals including deliverables and milestones Schedule periodic checks in to assess progress and reevaluate the plan Source: Adapted from E Dale, Audiovisual Methods in Teaching, 1969, NY: Dryden Press. Sample Professional Development Tactics Mentoring. Mentoring can be done formally or informally. It is most successful when both parties involved are committed to the process and understand their roles. The mentor s role is to provide guidance and support as the developing employee continues to make progress on their goals. The mentee in turn is responsible for driving the process by scheduling regular meetings and discussion topics. This is a great way to encourage more senior members of the firm to invest in the next generation of firm leaders while deriving personal satisfaction from the experience.

18 the firm. The presence of this role can help the firm reduce dependency on senior team members while simultaneously enabling them to spend their time more effectively growing the firm. Stretch Assignments. A stretch assignment is a project or a task that is outside of the associate advisor s current realm of responsibility and comfort zone. They allow the individual to continue to build their skill set in preparation for the next step in their career or to provide a new challenge in a role they may have already mastered. Teach Backs. Teach backs provide an individual the opportunity to share their knowledge and expertise with others. The idea being that once an individual has thoroughly mastered a skill or become a subject matter expert they can pay it forward to other team members who may have a similar interest or identified this as an area for further development. Job Shadowing. Job shadowing is particularly important when bringing on an associate advisor. Providing ample opportunities to join the lead advisor in client meetings, networking events and business development activities will be invaluable in helping them understand how you work with and serve clients, your firm s investment philosophy and culture. It will also serve as an opportunity to observe the skills required at the next level of their projected career trajectory. Formal Training. Formal training opportunities can be provided to team members through webcasts, videos, workshops, e-learning, classroom, simulation and more. You may choose to provide some of these in house or leverage third parties such as a local university or online training solution. In some cases you may offer tuition reimbursement. Industry Conferences. Industry conferences offer numerous benefits from a professional development perspective. Conferences offer attendees access to industry thought leaders, research and solutions as well as continuing education credits for widely recognized designations. In addition to the educational benefits they are an excellent venue for networking and developing relationships with industry peers to share ideas and best practices. Case Study: The Key to Success Invest in Your People SignatureFD, founded in 1997, is an advisory firm with a keen grasp of how the right personnel practices can drive and sustain business growth. Jeff Peller, the firm s CEO and Co-Founder stressed that Talent is what s going to make it in an industry where it is getting harder and harder to achieve success. Peller further added, If you re looking to building a firm of lasting value, there s only one way you can do it invest in people. One of the key ingredients to SignatureFD s success in bringing in top-performing advisors is having a thorough onboarding process. Before we bring in a new advisor, we determine who is going to be their mentor. We have to define who on our team is dedicated to making the new hire successful here. Who is going to help them work through the process, go on joint meetings, and help answer questions? There s a difference when people are very clear on who is responsible. To download the full case study, visit tdainstitutional.com/breakoutgrowth. Summary What is your vision for your firm in five years? In 10 years? If you are among the 80% of advisory firms looking to significantly grow your firm, you will need to first carefully consider your motivations for growth, assess the impact on your current situation, and identify the resources you need to get you to that next level moving from a practice to a sustainable business and ensuring your legacy and life s work will continue beyond you. How you choose to hire and integrate key positions to help you achieve transformative, sustainable growth will be a deciding factor in your success. As your firm grows and evolves, resources become increasingly important. As discussed throughout this guide, one of the most important positions you can add is the associate advisor. As important as recognizing the need for and value of the associate advisor position is understanding the right time to hire. As you near the thresholds that traditionally call for the addition of this position, consider the compelling growth rates experienced by firms that add an associate advisor at the opportune time. In addition to making direct revenue-generating contributions, the associate advisor can play an influential role on how the firm s lead advisors and principals contribute to As you consider the addition of an associate advisor you will need to: Envision your future growth. Reflect on your strategic growth plan and design your organizational structure to support your growth aspirations. Define roles and responsibilities. Clearly define all of the accountabilities for the role you are seeking to fill before commencing the recruitment process. Be clear on the level of competency and experience the position will require. Determine compensation and assess affordability. Understand the full cost associated with adding the position including cash compensation and benefits. Calculate the additional revenue that must be generated or expenses that must be reduced in order to maintain the firm s desired profit margin. Create a plan for increasing revenue generation and supporting initial expenses related to adding the position. Craft your recruiting experience. Give thought to your recruiting value proposition, candidate sourcing strategy, and vetting process. The cost of a bad hire will not only affect your firm financially but can be detrimental to the morale of existing team members. Build engagement from day one. Develop a detailed onboarding plan to begin building engagement on day one through the first 100 days. An effective onboarding process can increase the individual's effectiveness in the position sooner, decreasing the time required to recoup your investment. Education Center Education Center is a comprehensive learning management system and knowledge center offering for advisors and their staff to continue to develop professionally. It provides complimentary access to professional development resources, tools and continuing education credits in one convenient place. To access the Education Center, visit tdainstitutional.com/educationcenter. Successful advisory firm owners recognize that achieving true breakout growth is not accomplished by simply working longer or harder. Considering these guidelines will help firms make more effective hires, hastening the transformation from a practice to a business that can unlock real growth potential. To continue to support your efforts, TD Ameritrade has developed a number of how-to resources which are detailed in the subsequent appendices.

19 31 Liaise with other team members service to existing clients An undergraduate degree in business, Works with client services Responds to advice-related economics or equivalent work 32 Qualities Able to prioritize; deadline and Investment research associate or portfolio client calls experience with background in the Knowledge of key financial, detail sensitive Conducts research on topics that administrator on client Makes outgoing client financial services industry is required investment and risk management Takes direction and executes a plan may include the economy, documentation, client meeting courtesy calls concepts Dedicated to developing a career financial markets, individual preparation and processes Queries clients for updated Compensation Able to lead review meetings with within the financial services industry securities, mutual funds, Participates in regular team information pending annual and Base salary: $ (range based existing clients annuities, third-party money meetings semiannual reviews on experience) Can assure people and put them Functional Responsibilities managers and alternative Participates in annual business Intakes applications and forms Potential for commission element to at ease Support the lead advisor investments planning strategy session as as needed this position s compensation plan Comfortable with presentations and Relationship management Portfolio analysis and monitoring requested Coordinates portfolio reviews Incentive potential: $ telephone conversations Accountable for the ongoing Compiles and analyzes client Administrative and operational Participates in client meetings Salary increases are performance Excellent listener retention of a defined group of data to develop financial plans responsibilities with lead advisor to develop based Possesses a passion to help team existing clients Simulation modeling using Monte Data input client acquisition skills and to and clients Can identify and deliver to Carlo and other statistical Inputs portfolio transaction data support the conversion of Full Benefits Package Possesses strong analytical skills changing advice needs techniques into portfolio analysis or prospects to clients Four weeks of vacation Reliable and follows through Performs ongoing fact-finding to Passive/active management performance measurement Miscellaneous Six sick days on commitments uncover organic growth analysis software (if applicable) Assists in development, 401(k) plan Systematic approach to tasks opportunities, multi-generational Asset allocation strategies Enters client data (from the coordination and maximization of Health, vision and dental plans Ability to see big picture and opportunities, cross-selling and including alternatives investment questionnaire) vendor and external resource available handle details important personal information Tax gain/loss analysis Directs and monitors workflow providers Excellent computer skills (Word, Delivers excellent service Portfolio management required to service clients Supports special projects as Excel, PowerPoint, Internet); ability to supporting the generation of Assists in the development of Documents processes for all client assigned learn in-house programs and tools referrals from existing clients complex and highly customized analysis, financial planning and Assists members of the team Skilled in basic statistics and Prepares financial plan and other financial portfolios for high-networth research activities in the absence of when needed quantitative products portfolio theory client meeting preparatory individuals an operations manager Appendix A: Sample Job Description: Associate Advisor Associate Advisor Overview: The associate advisor position, sometimes referred to as junior advisor, is a support role to the lead advisor. Relative to the lead advisor, who is primarily focused on developing new business, the associate advisor is primarily responsible for the retention of existing client relationships. The position requires an individual who has a thorough knowledge of the financial services business and who is committed to being part of a team that delivers a comprehensive client solution. This individual must have strong relationship management skills. They must be reliable, organized and deadlinedriven. A qualified applicant must be dedicated, goal-oriented, and able to work well in a self-directed and collaborative environment. Assists with investment recommendations based on research, including rebalancing and asset allocation Prospecting Develops an ability to articulate the story of the practice and identify ideal qualified prospects Assembles customized proposals for clients and prospective clients Assists in building, tracking and maintaining prospect pipeline and prospecting plan Performs client fact-finding Provides insurance quotes Meets with private account managers on an ongoing basis Generates requested reports Develops and maintains standardized proposals, presentations and resource library Ensures that all investment management programs are updated (and upgraded) on a timely basis (this would include asset allocation and spreadsheet software and manager databases) Client interaction Meets, greets, and provides concierge service for visiting clients or prospects as needed Prepares for and leads ongoing client review meetings and supports the delivery of ongoing Maintains strong compliance documentation related to research and trading Fully utilizes all technological systems Educational and Experience Requirements and Preferences Background and experience in the financial services industry Five to seven years of advice and relationship management experience Licenses and credentials: Series 7, 63, 66, Life and Health Insurance Knowledge of Microsoft Office applications in a Windows XP/ VISTA/7 environment is required Source: Adapted from Building High-Performing Teams,.

20 Appendix B: Assessing Affordability Worksheet Step 3: Estimating Cash Compensation The following table will help you compute the total cash compensation cost of adding an associate advisor. Example Your Firm Position Benchmark Median $95,865 $ Local Labor Market Adjustment +10% +/- % Market-Adjusted Median $105,452 $ Target Pay Relative to Median +15% +/- % Cash Compensation Cost $121,269 $ Source: FA Insight based on FA Insight proprietary survey data, Estimating the Total Position Cost: Associate Advisor Step 1: Determine Where on the Range Your Firm Will Target Pay Using the information presented in Figure 8 found on page 14, you will need to determine where you will target pay for this position. The following guidelines provide a framework for thinking about compensating individuals at the minimum, mid-point or maximum. As you review these guidelines, you may find it helpful to refer to Appendix A: Sample Job Description Associate Advisor. Minimum Base pay at the lower end of the range is typically appropriate for an individual who is developing the required skill set for the role and has yet to fulfill all of the baseline accountabilities of the position. This may be a new incumbent in a position. Mid-Point Pay near the median reflects an individual who is fully competent to assume the position and is able to adequately complete all accountabilities as described within the position description. Maximum The higher end of the range reflects an individual who is highly experienced, is able to innovate within the role, coach and mentor others, and take a leadership position. Step 2: Adjust for Local Labor Market Conditions The above example begins with median benchmark cash compensation for the associate advisor position as per Figure 8 found on page 14. The data should be used as a guide only. A range of factors will influence the level of compensation for a position. In the example, the firm first adjusts the industry benchmark upwards by 10% to reflect higher cost local labor market conditions. Another 15% premium is then applied to reflect the competency level the firm intends to target. This final upward adjustment is consistent with the example firm s desire to hire a highly experienced associate advisor. Step 4: Projecting New Revenue Needed Now that you have determined your compensation philosophy and have arrived at a potential compensation range, the next step is to think through the economic justification for adding an associate advisor. The benefits of the role must, at some point, exceed the cost of maintaining it. You will need to consider the additional revenue the firm will need to generate in order to cover the cost of adding the position and maintaining your desired profit margin. For profitability to remain unaffected by the hire, your firm will need to increase revenue or reduce other expenses. Assuming no changes in expenses beyond those associated with the hire, additional revenue required will equal what is needed to cover the costs of the hire plus an additional factor to maintain the firm s profit margin. The calculation for projected needed new revenue is: The compensation benchmarks in Figure 8 found on page 14 reflect national aggregates. Adjustments may be warranted to better tailor the benchmarking to reflect your local labor market conditions. Adjustments of up to 20%, up or down, may be appropriate. For additional information on geographic adjustment factors, visit 3 New Revenue Needed = (Total Position Expense) / (1 - Desired Operating Profit Margin) 3 By visiting you will enter an unaffiliated third-party website to access its products and services. The third-party site is governed by its posted privacy policy and terms of use, and the third-party is solely responsible for the content and offerings on its website.