Journal of Financial Planning: November 2025
Cameron Logar, CRPC, CPTD, is founder of Next Peak Advisors (www.nextpeakadvisors.com), a consulting firm dedicated to helping registered investment adviser (RIA) firms elevate their talent strategy, drive growth, and build scalable organizational structures. She is a seasoned talent strategist and practice management expert with nearly two decades of experience in the financial services industry.
Every fall, advisory firm leaders dust off spreadsheets, debate bonus pools, and make one of the most consequential decisions of the year: how to pay their people. Advisers, in turn, tell me they want three things when it comes to incentive compensation:
- Line of sight: “Tell me which handful of actions will actually move my number.”
- Fair comparisons: “Benchmark me against a role, not a person.”
- Upside for excellence: “If I deliver extraordinary results the right way, will I feel it?”
Today, just in time for year-end planning, we’re going to make performance-based pay tangible: what to count, how to set targets, and how to pay in a way that lifts both individuals and the firm.
Why Compensation Clarity Matters
Money isn’t just a motivator, it’s a signal. The way you structure compensation tells your people what behaviors are valued, what outcomes matter, and what the firm prioritizes in the coming year. Without that clarity, employees are left guessing whether to focus on retention, referrals, planning throughput, or new assets.
Research tells us firms that link pay to measurable performance grow faster and retain talent longer. This is where compensation clarity matters most. Yet surveys show fewer than half of RIAs believe they even have a clear incentive plan. In other words, the industry talks a good game about accountability but often leaves the scoreboard unplugged. DeVoe & Co. found only 43 percent of firms report having a clear incentive compensation plan in place in 2024, down from 57 percent just two years earlier (Cohen 2024).
Compensation clarity doesn’t just drive growth; it also keeps your best people from leaving. Turnover in an advisory firm is expensive—InvestmentNews (2023) reports the cost of replacing a skilled adviser or operations leader can reach 150–200 percent of annual salary once you account for recruiting fees, lost productivity, and client disruption. For mid-sized firms, that’s a six-figure risk every time someone walks out the door.
Dimensional (2024) surveys consistently show that lack of a clear career path and unclear compensation plans are among the top reasons advisers explore other opportunities. In today’s market, where competitors are actively poaching talent with promises of transparency, ambiguity is a liability.
Schwab’s 2024 benchmarking study found that base salary still accounts for roughly 79 percent of total cash compensation across roles in RIAs, with incentive pay and revenue-based pay making up the rest (Charles Schwab 2024a). That’s not surprising—salary stability matters. But the same Schwab report also showed that firms using performance-based pay achieved 51 percent greater five-year revenue growth and 43 percent greater client growth than firms that don’t. The takeaway isn’t to over-rotate on bonuses, but to recognize that when incentives are aligned and transparent, they accelerate results.
Avoid the Two Classic Traps
- Trap 1: Paying for things no one controls. When results hinge more on market tides or acquisitions than on individual effort, people stop believing the plan reflects their contribution. Choose metrics that individuals or teams can meaningfully influence (e.g., net flows from ongoing clients, not just AUM at year-end).
- Trap 2: “Eat-what-you-kill” tunnel vision. Tying too much to personal production can sabotage teaming, client coverage depth, and margin discipline. According to Charles Schwab’s 2024 RIA Compensation Report, only about 29 percent of firms tie compensation to revenue—and the firms that do see faster growth—but they typically do it as part of a balanced plan, not the whole story (Charles Schwab 2024b).
Defining What Counts
High-performing firms pay for the behaviors that create the outcomes the firm values. Here’s a clean, three-tier lens that works from associate to CEO:
- Role expectations (what this seat exists to achieve). These are the blocking and tackling specifics of the job: planning quality, response times, error-free execution, documentation standards. These should be table stakes for salary progression and eligibility for bonus—not the main variable-pay engine.
- Strategic alignment (this year’s push). Each year brings a push—technology adoption, segmentation discipline, custodial migration. Allocating part of variable pay to strategic initiatives ensures attention where leadership most needs it. Some specific examples: migrating X percent of clients to tiered service packages, implementing tax-aware rebalancing for the top segment, or leading a CRM clean-up.
- Firm results (everyone rows together). Everyone should be aligned to revenue growth, profitability, and client retention. That way, no matter their role, employees feel connected to the bigger picture. For example, net asset flows from new and existing clients, net new households within target segments, wallet-share expansion, retention rates, or referral conversion.
If your 2026 goals centers on deepening share of wallet and margin improvement, your incentives should weight retention, cross-servicing, and segment-level profitability—not just top-line AUM. If you’re in an aggressive client acquisition phase, place heavier weights on new ideal-fit households and first-year revenue quality.
Best Practices for Setting KPIs
It’s not enough to decide what categories to measure; the mechanics of how you set and track key performance indicators (KPIs) matter just as much. A few best practices show up again and again in firms that do this well:
- Keep it focused. Limit KPIs to three to five per role. Beyond that, employees lose sight of what really matters, and incentives turn into noise.
- Use ranges, not cliffs. Define threshold, target, and stretch levels for each KPI. For example: 80 percent of goal might pay out 50 percent of target bonus, 100 percent delivers full payout, and 120+ percent earns stretch. This keeps motivation high across the spectrum of performance.
- Test affordability. Before finalizing ranges, model payouts at both target and stretch to ensure firm margins still hold up. The goal is to reward excellence without jeopardizing economics.
- Check progress quarterly. Don’t wait until year-end to reveal results. Quarterly scorecard reviews keep energy up, allow for mid-course corrections, and reduce surprises when bonuses are calculated.
Done well, KPIs create clarity without rigidity. They give employees autonomy in how to achieve results, while ensuring leadership can trust that effort is moving the firm in the right direction.
Three Real-World Incentive Blueprints
These examples aren’t prescriptions—there’s no one-size-fits-all incentive plan. Instead, they highlight how several successful firms structure pay for certain roles. The right design for your firm should reflect your goals and the culture you want to reinforce.
Blueprint A: Balanced Adviser Plan (for Lead and Service Advisers)
A firm adopted this approach after struggling with uneven adviser performance. Advisers appreciated that success wasn’t just about bringing in new assets but also about delivering on promises to existing clients.
- 50 percent firm results: revenue versus plan (weight 30 percent), net client growth (20 percent)
- 30 percent role outcomes:
o Lead adviser: net new ideal-fit households
(15 percent), expansion revenue from existing
clients (15 percent)
o Service adviser: revenue retention (15
percent), planning projects completed on
time (15 percent)
- 20 percent strategic behaviors: e.g., move 90 percent of top-segment clients to annual tax planning or achieve <1 percent documentation error rate post-review
Blueprint B: Revenue Plus Quality
An RIA in growth mode learned the hard way that not all flows are good flows. They once celebrated a surge in new households, only to find many were underpriced and time intensive. By weighting profitability equal to net flows, they sent a clear message: growth has to be both fit and financially sound.
- 40 percent firm results: margin and net flows carry equal weight to blunt a “grow at any cost” mindset
- 40 percent adviser outcomes: net new revenue (25 percent) + quality score (15 percent) where “quality” = fit + pricing integrity + multi-service adoption (e.g., planning + tax)
- 20 percent projects: e.g., stand up centers-of-influence program that drives 10 qualified introductions per quarter
Blueprint C: Team-Indexed Operations Plan (for Client Service/Ops)
An operations team at a firm tied part of its incentive plan to error reduction and automation milestones. The firm hoped to drop “not in good order” (NIGO) rates in half to free up capacity across the firm.
- 50 percent firm results: client satisfaction floor plus revenue versus plan
- 30 percent team outcomes: cycle-time reduction, error rate, first-contact resolution, document completion SLAs
- 20 percent strategic: automation milestones, custodial transition readiness, or data hygiene projects
Keep in mind, compensation is culture with numbers. Publishing clear rules and measuring them consistently does more than drive performance—it creates trust. Conversely, ambiguity erodes it. The industry doesn’t need more complicated plans; it needs more visible ones.
Closing the Loop for Year-End
If you’re a leader at your firm, consider implementing these steps into your compensation planning cycle this year:
- Pick the few metrics that matter most to your 2026 strategy.
- Weight them visibly using a clear framework.
- Publish the scorecards for every role.
- Model the economics at threshold/target/stretch, aligned to margin.
And if you’re an adviser thinking about your own comp? Draft your own one-page scoreboard with the three outcomes that matter most to your seat. Bring it to leadership and ask if those are the right signals. Most leaders will welcome the initiative, and you’ll learn quickly what actually counts.
We’ll spend future columns digging deeper into career paths, equity, and leadership development. For now, compensation season is here. Make it count.
References
Charles Schwab. 2024a. RIA Benchmarking Study. San Francisco, CA. https://advisorservices.schwab.com/resource/intentional-approach-to-growth-results-from-2024-ria-benchmarking-study-from-charles-schwab.
Charles Schwab. 2024b. RIA Compensation Report. San Francisco, CA. https://content.schwab.com/web/retail/public/about-schwab/Schwab-RIA-Compensation-Report-2024.pdf.
Cohen, Andrew. 2024. “RIAs perform ‘shockingly low’ on employee compensation metrics: DeVoe Report.” InvestmentNews. www.investmentnews.com/ria-news/rias-perform-shockingly-low-on-employee-compensation-metrics-devoe-report/261944.
Dimensional Fund Advisors. 2024. Global Advisor Study. Austin, TX.
InvestmentNews. 2023. Adviser Compensation & Staffing Study. New York, NY. www.investmentnews.com/practice-management/unlock-your-firms-full-potential-with-the-ultimate-advisory-study/247651.