News

The question should not be “what should we pay,” but rather “how do we pay to incentivize recruitment, retention and growth” of key team members. Focusing too narrowly on salary adjustments or annual bonus increases misses the broader opportunity to use compensation as a growth lever. Firms that anchor these discussions in the growth of the individual, the team and the firm transform compensation into a powerful investment mechanism.

In addition to focusing on salary and bonus alignment, equity opportunities should also be a consideration for key team members. Data show that firms that reward top talent with equity leverage next-generation ownership to outperform their peers, achieving 48% higher EBITDA, according to FP Transitions Benchmarking Data 2025. 

How and when you grow your team are also key strategic decisions. Firms under $750,000 typically have one to two advisors with joint support, while firms in the $750,000 to $1.75 million range average two to three advisors. As firms reach $4 million to $6 million in revenue, the typical structure expands to six advisors or so with specialized support roles, according to FP Transitions Benchmarking Data 2025. Getting the people and employment timing right prevents two costly mistakes: hiring too early (straining budgets before revenue supports it) and hiring too late (burning out your team).

When your team structure matches other successful firms of your size, compensation dollars work more efficiently. And when a structure encourages collaboration and leadership, your team becomes the foundation for stable client service and increased profitability.

Fostering Dialogue Over Negotiation

Rather than having the yearly debate over dollar amounts, have an open conversation about how future compensation will be tied to individual efforts made toward company outcomes such as firm revenue and profitability growth. Employees value clarity on how their contributions will be rewarded in the short term, and how those contributions may open pathways to leadership and equity in the future.

The most effective compensation structures are those rooted in an understanding of both the firm’s trajectory and the team’s individual growth priorities and motivational triggers.

In terms of bonuses, bonus program effectiveness relies on consistency. Firms that have bonus payouts that vary wildly year-to-year create more confusion than motivation. Excluding specific growth-based bonus plans, the most successful firms maintain bonus programs within a predictable range for their size; typically closer to 10% of base salaries for mid-size firms and closer to 15% for larger firms, according to FP Transitions. Consistency does not mean a guarantee of bonuses, but the formula should be relatively stable and the plan transparent so your team can connect their efforts to outcomes.

Collaborate with your team to set appropriate metrics with commensurate rewards, ensuring that career paths and compensation are inextricably linked. This shift helps the team view their pay as a long-term journey together rather than an annual negotiation between opposing parties.

Building Trust Through Performance Transparency

Ambiguity often leads to distrust and retention risk.

Defining individual performance metrics provides the clarity needed for employee encouragement. When you share common key performance indicators that matter most and develop KPIs for your team, such as revenue managed per advisor or revenue growth benchmarks, you create the ability to connect individual effort to bonus pools and equity eligibility.

This performance transparency and income opportunity result in retention and beneficial advisor gains. On average, advisory professionals earn at least $13,000 more in compensation each year, but that figure increases by nearly 30% when tenure remains within the same firm, according to FP Transitions Compensation Study 2025.

Regular compensation reviews prevent drift toward unfair structures or misaligned expectations. When salaries fall significantly outside of role benchmarks—whether too high or too low—it signals either unique performance or, more commonly, that there is an issue to resolve. Annual calibration, comparing each role against both national benchmarks and peer firms of similar size, ensures your compensation remains strategically sound. This isn't about perfect alignment; it's about understanding and justifying your variances based on performance, market conditions, and strategic priorities.

Openly discussing awareness around compensation insights and how your compensation system will reward the achievement of KPIs on an individual and company level will help to ensure your team feels like an integral unit for growth, rather than a “cog in someone else’s machine.”

Linking Compensation to Future Company Objectives

Effective compensation strategies are proactive, addressing the opportunities of the coming years rather than focusing on fixing past challenges.

A compensation structure can be used strategically after understanding your team’s priorities and motivational triggers, by aligning those with the company’s objectives. Three of the most common strategic objectives include: