We have heard of firms winning employee loyalty by paying them more, but never—until we spoke to the principal at Colorado West Investments—by paying them less.

At the Montrose, Colo.-based wealth management firm, that is what Kevin Sanderford ended up doing to rationalize the firm’s compensation plan. After the awful downturn in 2008, Sanderford had to lower compensation for his practice manager, who also had a series 7 license. She was not drawing a huge salary—indeed, it was below market rate for the area—but she received a generous bonus. Too big, apparently. Sanderford had loosely pegged her bonus the firm’s performance. Without a systematic payout, though, the extra compensation ended up being outsized.

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