When Thomas O’Connor was hired as a junior associate advisor at Keel Point, he made up for what he lacked in proper industry knowledge with plenty of work ethic.
“I was basically told that if you’re committed to learning and you like serving people you’re going to do just fine,” he said about joining the $2.1 billion firm near Huntsville, Alabama. At the time he was 25 years old, was fresh from a short stint at an insurance company and had little knowledge about the inner workings of the advisory space.
Eight years later, O’Connor is now a senior advisor, servicing approximately 110 clients with $125 million in assets under management. He credits his success to the advisors who took a chance on him.
“I got skinned up numerous times just learning through making mistakes,” O’Connor says. “But over time, they were right — I was able to find some success and I was able to grow through those experiences.”
The planner's experience is noteable for another reason: that he was hired at all. In fact, his experience illustrates a larger trend in which advisory firms are hiring younger and less-knowledgable advisors. As a result, compensation for associate advisors is falling.
Total median compensation per capita dropped by $20,000 from 2017 to 2018, according to TD Ameritrade’s 2019 FA Insight Survey of advisory firms. When broken down by position, compensation for associate advisors dipped 4.3% while lead advisors saw a 6.1% increase.
Since the previous survey was conducted two years ago, firms that have onboarded younger talent have subsequently lowered base salaries, says Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional.
“It's so hard to find experienced advisors who are willing to move,” says Oligino. “[So] they are beginning to hire less-experienced individuals and spending the time and resources to groom them internally.”
The typical experience level for an associate advisor has dropped to six years in 2019 from eight years in 2017, according to the survey.
With 55% of firms employing at least one associate advisor, the decline in median compensation suggests that more entry-level candidates are joining the ranks of associate advisors, with firms preferring to develop next-generation talent rather than bring on more experienced individuals.
Such was the case with Nayeli Sanchez, hired by Bothell, Washington-based Viridian Advisors upon graduating from her CFP program at Central Washington University. Though the firm did not have a position open at the time of Sanchez’s interview, firm founder and CEO Adriel Tam brought her on as a client service associate.
“We thought it was just such a great fit that we would find the position,” he says.
At Viridian, client service associates support the firm’s advisors and learn about all parts of the company, according to Tam. Sanchez is now working toward being a senior advisor and shareholder in the $650 million company, hoping to build a client base of Hispanic and LGBTQ+ clients.
Industrywide, associate advisors spend 12% more time with clients than lead advisors, according to the survey. This is standard practice for associate advisors, says a TDA spokeswoman, because lead advisors dedicate more time to business development.
Sanchez and O’Connor both say hands-on experience has helped them better understand their roles.
“Every client is different and knowing how to interact with them is probably the best way of training,” Sanchez says.
For his part, O’Connor says he’s gained the ability to learn the business the “right way.”
“That really is truly where you learn,” he says. “You're learning just through having the conversations with the clients and every one of those conversations leads to some follow-up action.”
