Ross Gerber, president and chief executive of Gerber Kawasaki in San Monica, Calif., has few qualms about stating his overriding philosophy: “I’m a capitalist,” he said.
No surprise then that he wants to share that capitalistic risk-taking with all his employees. Everyone employed at Gerber Kawasaki, including 19 advisors, share equity stakes in the firm, and each compensation package includes a base salary and a percentage of the revenue that they each help generate.
Such incentives drive employees to find new revenue sources: new clients. As a result, Gerber Kawasaki has grown by leaps and bounds.
Started from scratch in 2010, the firm now has $410 million in assets under management.
But the employees’ compensation isn’t the only factor driving client growth.
Gerber and his co-founding partner also have engaged in innovative use of social media and distinguished the firm by marketing focused on baby boomers, GenXers, and millennials. Also he himself has become a go-to source for the news media, being quoted in “The Wall Street Journal” and appearing on CNBC and Fox Business.
Indeed, tying compensation directly to rainmaking should never be viewed as the only or exclusive key to inspiring advisory team members to build client rosters, veteran firm managers say.
The topic of how his firm should set compensation to effectively build the business arises frequently, said Bob Lamse, president of and partner in Talis Advisory Services in Plano, Texas.
“This is a topic that we have discussed often internally and with others in our industry,” he said.
Lamse isn’t alone.
A recent survey of 351 firms by consulting group FA Insight shows that in the past two years, 23% of the respondents said that they increased performance-based incentive shares at their firm.
At Talis Advisory Services, Lamse initially embraced 100% the philosophy of rewarding employees for client development, but he has since changed to a modified version of that strategy.
“When we first started as a smaller firm, we utilized mostly an eat-what-you-kill pay structure. We have shifted now to a blended approach,” Lamse said.
The firm, which employs 12 people, including nine advisors, made those changes to promote a team structure.
“We now have an entire staff that works well in a team environment, which is sometimes harder to achieve than you would think. Some people prefer to work more in a ‘silo approach,’ and we do not feel that this approach serves the client best,” Lamse said.
Miriam Rozen writes about the financial advisory industry and is a staff reporter for Texas Lawyer.
This story is part of a 30-day series on smart ways to grow your practice.