From the course: Financial Planning and Wealth Management Fundamentals

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Sink-or-swim compensation

Sink-or-swim compensation

From the course: Financial Planning and Wealth Management Fundamentals

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Sink-or-swim compensation

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While financial planners are paid a salary from the firm that they work for, things are a bit different in wealth management firms. They tend to have a much more, quote, sink or swim type of culture. So usually investment advisors are only paid a salary for the first year or two of their careers, which is treated as a sort of probationary period. This is mainly to give the advisor the means to live off while they're building their book of business. And after that probationary period has passed, the advisory's salary is removed and they switch to a fully commission-based compensation structure. The idea here is that the firm assigns an Assets Under Management, or AUM, target to the advisor during their probationary period. And let's hypothetically say that the target AUM is $50 million, and the probationary period is for two years. If after two years, the advisor has not built their book to that size, they may realistically be asked to leave the role or the firm altogether. However, if…

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