A reward system that goes beyond the traditional salary/bonus structure.

A critical element in the success of any small business is its ability to recruit, reward, and retain talented advisors and support staff. To this end, equity is often used in addition to, or in conjunction with, compensation to achieve these goals. Synthetic equity is a tool set that can provide ownership-level benefits without buying or selling actual stock in an advisory business.

A few situations where leveraging synthetic equity can be useful are:

  • An owner who wants to retire and sell his or her practice in five years or less and wants to reward one or more key employees at the time of the sale without having to actually sell equity beforehand;
  • An owner who wants to not only provide a key employee with incentives for growing the business but also needs to create strong disincentives against the employee leaving and competing with the business, soliciting clients, or acting in a manner detrimental to the business;
  • A key employee who wants to receive ownership-like benefits, but is unable or unwilling to take on the financial risk of actually buying and paying for equity in the business;
  • A key employee who desires to be an owner but who does not have the necessary licenses or qualifications to be a full equity partner.

Synthetic equity, just like actual equity, can be used to reward and retain the necessary key employees to grow a strong and valuable practice. As with full equity, synthetic equity can re-center the focus of a key employee, advisor, or producer, and encourage them to contribute—at every level—to a growing and sustainable business.

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