3 mistakes to avoid when compensating junior advisors

By Jason L. Smith

When it comes to compensation for junior advisors, companies often make the following mistakes:

1. Giving them too much of the revenue off the sale they make. For example, some businesses pay 80 percent, leaving only 20 percent to pay expenses for the firm and turn a profit. That’s not realistic.
2. Allowing residual income revenue to go directly to the junior advisor from the insurance company or financial institution. That money should be payable to you or your firm. You should do the accounting and then you pay the advisor. Otherwise, it’s too easy for them to leave because the revenue is going directly to them.
3. Paying them too little. If you pay 50 percent or less of their sales revenue, they may decide they can make more on their own. Split revenue between the find, the mind and the grind. Using this compensation structure, for example, 40 percent goes back to the house, 20 percent to the person who found the client (the find), 20 percent to the person who formulates the plan and closes the sale (the mind), and 20 percent to the person who services the client (the grind).

Smith, a 12-year MDRT member from Westlake, Ohio, is President and CEO of Clarity 2 Prosperity, a financial services training and coaching company. Read more in the Round the Table article “Training and compensating junior advisors”