Practice Made Perfect 15 is the ideal opportunity to spend quality time with the best financial-advisory business consultants in the country. You get tips, tools, and worksheets to ensure that you can manage your practice to become the business success you want it to be. This book will be your new best friend—guaranteed | 118 Practice Made Perfect figure Compensation Components Source Moss Adams LLP mission-based pay is essentially variable base pay. Like fixed base pay commission-based pay is the amount an individual gets paid for doing his or her job. The more an individual s performance is tied to revenue generation the more contingent on short-term variables that person s pay should be. The more an individual s role is related to processes or administration the more fixed his or her compensation should be. But there are variations on these themes depending on the type of culture and organization you re trying to create. Bonuses and Incentives A bonus or incentive is an amount over and above base pay that should be awarded when the business or individual achieves certain milestones or exceeds expectations. Too many advisory firms pay a bonus rather than an incentive. A bonus is usually a surprise it is not typically tied to any measurable expectation and tends to be discretionary. An incentive on the other hand links performance and behavior to the pay. it s important when setting up incentive programs to measure and reward the right types of performance and not merely achievement of the ordinary or expected. in compensating a professional adviser it s typical to have some amount of compensation at risk incentive pay based on the performance of either the firm or the individual or both . The theory is that incentive pay motivates a certain kind of behavior determined The Payoff for the Firm Compensation Planning 119 by how you structure the incentive plan and that incentive pay allows you to strike the desired balance of risk between the professionals and the organization. Most firms that do not have incentive pay omit it either by neglect or because they do not know what to measure. In some cases the reluctance seems to stem more from the desire not to judge or distinguish one individual s performance or contribution from another s at the risk of saying one is better than .
