AFA Analysis

How Should You Pay Your AFA?

Associate Financial Advisor (AFA) Compensation is one of the most confusing and frustrating topics for advisors. How do you pay your AFA in a way that motivates performance? How do you design a win-win compensation system? And once you design the system, how do you put it into practice?

This service helps advisors think strategically about AFA's role. We help advisors design motivating, profitable, and adaptable compensation systems that lead to long-term success.

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Individualized Strategies

Each AFA brings a unique set of skills, experiences, attitudes, and contributions to your practice. Some AFAs are hired as support staff, while others are basically advisors. For this reason, rarely are two AFA roles exactly the same. Rather than just looking at the "average" AFA compensation, we take a deep dive into your AFA's specific situation.

Value Added

Some AFAs bring a book of business to the practice, some service the advisor's clients, and some perform a mix of job functions. What are the direct and indirect financial impacts of your AFA's role?

Changes Over Time

AFAs are often hired with the expectation that they will "grow into" the advsior role. But how will that transition take place? What are realistic goals for the AFA's future? How do you measure his/her success?

Expenses

The AFA role comes with additional risks and expenses that make it unlike other positions in your practice. Who should be responsible for the expenses? How may your W2/1099 status impact those decisions?

Equity and Succession

Have you discussed what happens to the clients in the event of a termination, death, or disability? Is your AFA part of your succession strategy? Is the expectation that your AFA will one day buy your practice?

Compensation

How should your pay your AFA? Salary? Bonuses? Compensation Splits? How do you enact these plans so that they are compliant with the various rules and regulations? How do you adjust these items as time progresses?

How the Service Works

This service is a consulting arrangement with the employing advisor (not the AFA). We do not typically meet with the AFA as part of this service.

We strive to empower the employing advisor with the information necessary to develop a purposeful, strategic, and actionable compensation strategy backed by a detailed financial analysis and rationale. We strive to design compensation strategies that are both rewarding for the AFA and profitable for the advisor.

Step 1.

Collect Data

Collect Data

After you purchase this service, you will be sent a short questionnaire to provide some background information. We will also collect specific reports about your practice to help us measure the economic impacts of the AFA to your revenue and expenses.

Step 2.

Working Sessions

Working Sessions

You will meet 1:1 with our analyst to begin working through your AFA's case. Each case generally requires about 2-4 working sessions. You will be able to see and provide feedback on the models, scenarios, and calculations throughout the process.

Step 3.

Deliverables

Deliverables

You will receive two deliverables from this service: 1) An Advisor-Facing Report that includes a profitability analysis of your AFA's role, and 2) An AFA-Facing Report that explains the new compensation system to your AFA with the supporting calculations and rationale.

What's Included

This service includes the initial data gathering process, 2-4 working sessions for your case and the final deliverables. All meetings are held with the advsior. We do not meet with the AFAs directly. Our deliverables include a report that can be shared with the AFA.

Advisor-Facing Profitability Report

This report shows the advisor whether or not their current arrangement is profitable to the practice. Our analysis considers all impacts that an AFA may have to your practice in addition to production. Many AFA arrangements take a while to become profitable. This report helps to show when the arrangement becomes "break even" to the advisor.

Specific Sections Included in this Report:

  • Summary of AFA's Background and Credentials
  • Estimated Economic Value of AFA's Activities
  • Review of AFA's Expenses
  • Analysis of AFA's Book of Business
  • Analysis of Delegated Clients
  • Growth Assumptions
  • Five Year Goals for AFA
  • Proposed Compensation Plan
  • Five Year Projection of Compensation Plan
  • Detailed Step-by-Step Instructions on How to Set Up Plan

The AFA-Facing Compensation Summary

We provide this second report as a deliverable that the advisor can show to the AFA that explains the proposed arrangement from the AFA's perspective. This report does not detail the practice profit/losses, but rather explains the rationale behind the various components of the AFA's plan and what their compensation would/could be if certain goals are met.

Specific Sections Included in this Report:

  • Review of the AFA's Role and Expectations
  • Anticipated Changes Over Time
  • Proposal for Compensation Plan
  • Scenario Modeling to Show Net Comp
  • Year-by-Year Expected Changes
  • Equity Modeling, if applicable

What's the fee?

This is a fixed fee service available exclusively to Ameriprise Advisors. The price is $2,495.

How to Begin

You can purchase this service online using a credit card. Immediately afterward, you will receive an email with the initial survey link. Once we understand your situation, we will contact you for specific reports needed to start your case and schedule a time for our first meeting. (Most advisors report that the initial data collection generally takes less than 30 minutes).

AFA Analysis Team

Ben ThelenCoach/Analyst
Ph: 734.294.5206
bthelen@keymanagementgrp.com
Shana Anderson, MBACoach/Analyst
Ph: 325.725.3519
sanderson@keymanagementgrp.com
John Sullivan, CFP®Executive Coach/AFA Coach
Ph: 916.765.1529
jsullivan@keymanagementgrp.com
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