Determining how much to pay a new associate advisor can be one of the most critical – and complex – decisions a growing advisory firm makes. Compensation not only influences who applies for a position but also sets the tone for the productivity required by that employee: paying too little may limit candidate quality or long-term retention, while overpaying can hinder profitability unless the employee delivers commensurate value. Given the financial and operational ripple effects of these decisions, firms must strike a careful balance between competitiveness and sustainability in designing compensation packages for early-career advisors.
In this article, Senior Financial Planning Nerd Sydney Squires discusses industry trends for associate advisor compensation – including variable pay tied to firm or individual performance, core benefits such as healthcare and retirement plans, and non-financial motivators such as career development and firm culture – and how hiring firms can use this information to create a competitive offer.
While base salaries remain the foundation of compensation, data from the latest Kitces Research on Advisor Wellbeing shows that most advisors received some level of incentive pay. Overall, most incentive structures are tied either to firm revenue or to individual qualitative performance, with the latter slightly more common.
Additionally, benefits play a substantial role in candidate decision-making. Across the industry, larger firms tend to offer more robust benefit packages, including comprehensive health insurance and higher employer retirement plan contributions, while smaller firms often differentiate through day-to-day flexibility and personalized offerings. Health insurance is near-universal among mid-to-large firms, and retirement benefits like 401(k) plans with employer contributions are increasingly viewed as baseline expectations. Meanwhile, offerings such as parental leave, professional development stipends, wellness subsidies, and generous PTO policies can serve as tiebreakers in a competitive labor market – though these are often more accessible to firms with deeper resources or more mature infrastructure. Likewise, benefits like parental leave are increasingly expected – with over 70% of firms offering some form of paid leave – and can influence both recruitment and long-term retention, especially among younger professionals planning for major life transitions.
Remote and flexible work arrangements also continue to shape the employee experience. While fully remote roles are less common than they once were, flexibility remains a highly valued perk, especially among early-career professionals. At the same time, fully remote associate advisor roles may limit on-the-job learning and mentorship opportunities, which are critical for professional growth. Thus, firms can remain competitive even with in-office expectations by offering moderate flexibility in hours or schedules.
Ultimately, compensation is both a strategic and cultural signal. For small but growing firms, it's rarely feasible to offer everything at once. But by thoughtfully designing a compensation package that blends competitive pay, scalable incentives, and high-impact benefits, advisory firms can attract strong associate advisor candidates while aligning their compensation philosophy with firm values and long-term growth plans. As expectations continue to evolve, firms that stay attuned to what early-career professionals value – and communicate their offerings transparently – will be best positioned to recruit, retain, and grow talent that fuels the firm's future!
