Two great risks to any compensation model

We believe there are two great risks to any compensation model:

• Underpay excellence: We reside in an industry that actually doesn't manufacture anything, so likely all you have is your intellectual capital and your client engagement model to separate you from the competition. We believe there is no substitute for intellect. Always be willing to pay a little more for excellence because, in an increasingly commoditized world, mediocrity can be death!
• Overpay mediocrity: Perhaps nothing destroys the morale of a team faster than someone not pulling his/her weight (especially if that someone is overpaid). Encourage team members to make sure they have the talent and the training necessary to do their jobs at an exceptional level first. If they don't, it's time to have a serious conversation, establish performance metrics, and, where possible, tie their bonuses to their performance.

Our "yours, mine, and ours" dating model is designed to last between 12 and 24 months. This model is built to allow you to "test the water" and to ensure that the synergies you anticipate in forming your team actually materialize. When they do, it is imperative, in our view, that you move to a permanent compensation structure that unifies the team around the entire clientele. You will see this model below.

"Dating" compensation structure

When you are in the "dating phase" of a new relationship, you often have separate apartments, different circles of friends, separate checking accounts, and separate balance sheets. It is only after marriage, in most cases, that you bring these respective worlds together. We utilize the same sequencing model as you move from the exploratory phase, through the dating phase, and ultimately into a synergistic marriage of your respective practices. This model is built to allow you and your prospective partner(s) to test drive your new team structure without disrupting your respective practices. You open a joint account, seed that joint account with all-new business (and at your discretion, with some existing business), and work with those clients as you anticipate working with all of your respective clients once you become a fully integrated team. If you are the portfolio manager and your prospective partner is the financial planner, you bring that model to bear with your new joint clients. If you are adding a banking, lending, and/or estate planning specialist to your existing team, you might integrate that partner into your joint account clients to see how that works out before bringing the entire business together.

"Marriage" compensation structure

Usually after somewhere between 12 and 24 months of working together only on your joint account business, you might come to the conclusion that there is, in fact, synergy (1+1 = 3) or just redundancy (1+1 = 2). If there is just redundancy, you can simply split up the joint account business and go your separate ways with little difficulty. If you find there is, in fact, the synergy you anticipated (1+1 = 3), the next phase is to bring the entire business together and create splits that basically replicate each partner's gross revenue. Then, work with your firm's marketing department to put together a team brochure and business cards. We can help you frame a message that is designed to clearly articulate your new team and its capabilities. Once this is completed, it's time to "raise the curtain" of your new team and its expanded capability with the goal of handling the complex challenges of your wealthiest clients.