INVESTMENT NEWS
September 13, 2009
By KEN TARBOUS
While few independent advisory firms were able to completely avoid salary cuts, the owners of many firms reduced the extent of those cuts by slashing their own paychecks in 2008.
The 2009 Moss Adams/InvestmentNews Adviser Compensation and Staffing Study found that the heads of nearly 70% of the 757 independent advisory firms surveyed cut their own salaries last year — in many instances to a greater degree than they asked their employees to absorb.
“The owners have tried to take most of the pain themselves, particularly the firms that are better-positioned in the long run,” said Matt McGinness, a principal at Best Practices Research, the research and consulting firm that analyzed the survey results. “They have done that [rather than] cutting staff.”
Enlarge This PhotoIn many cases, the owners' pay cuts helped forestall, or even avoid altogether, widespread salary reductions, Mr. McGinness said.
For employees, seeing a firm owner take a bigger pay cut than they had to is something of a morale booster, said Sean Cunniff, research director in the brokerage and wealth management practices at The Tower Group Inc.
“It is tough medicine in the short run, but it can pay for itself many times over in the long term,” he said.
Indeed, “these times will define the character of firms,” said Philip Palaveev, president of Fusion Advisor Network, which provides independent advisory firms with business management consulting, marketing support, advice on best practices and other tools. “There's a lot of research that culture is created [during time of] crisis.”
George Tamer, director of strategic relationships at TD Ameritrade Institutional, whose team has worked with more than 1,800 advisors this year, said that beyond cutting their own compensation, owners of advisory firms are trying to find ways to reduce expenses, such as renegotiating equipment leases and attacking operational inefficiencies, before cutting employee compensation.
