Amy Parvaneh: Creative Compensation Structures That Motivate Teams

This podcast is brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions with wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.

Hello and welcome to Barron's The Way Forward. I'm Greg Bartellis, and my guest today is Amy Parvana, founder and CEO of Select Advisors Institute, a full-service outsourced marketing agency and sales management firm that works with some of the nation's largest wealth management teams and firms around all things related to revenue expansion and AUM growth. Her firm has been engaged by various financial institutions and teams to help around all things related to organic marketing strategy, rebranding, website design and optimization, sales program development and training, business and leadership consulting and coaching, family office go-to-market strategies, and recruiting, to name but a few. And today we will discuss creative compensation structures that motivate teams. Amy, welcome to the podcast.

Thank you so much, Greg, for having me here.

Absolutely. Let's talk about your background a little bit because it is unique. And then, you know, quickly talk about your career trajectory and what led you to launch this firm.

Yeah, absolutely. And the reason why I love talking about my background a lot of times is when I speak with up-and-coming advisors or CEOs who are looking to groom their team, one of the key things that comes out is, is sales and a growth mindset something you're born with, or is it something that could be taught and developed? And I use my own background, which is that I moved to the United States when I was 12 years old from a third world country where my parents had to take, you know, odd-end jobs in order to make things survive for me and my sister. And so because of that, it really groomed me to be almost like a survivalist mindset and a hunter in achieving my goals. And so I provide that background a lot of times to why I even started Select Advisors. Which is to be a chief growth officer for financial firms. After I moved to the US, my quick bio is that I went to undergrad at Stony Brook University in New York, went into investment banking for a bit, then really wanted to pursue something more on the private individual on the end investor route. And so went to Duke University, studied my master's obviously, but with a specific focus on luxury branding. And how do you, sell, for lack of a better term, to the ultra-high net worth. And from there I joined Goldman Sachs in their private wealth management division. Had a great run while I was there, but really wanted to be more on the entrepreneurial track and more on the creative and marketing and consulting side of the business. So left, had a short stint at PIMCO. There I got my background working with RIAs. So I worked with both wirehouses and RIAs, and then in 2014, started Select Advisors really to provide all the arms and scale and manpower, or AKA woman power. We have a lot of women on our team, to the financial industry.

And what made you, I mean, you mentioned obviously the entrepreneurial drive, but what made you actually do it as opposed to just think about it seriously?

I think the kind of investors I was meeting while I was at Goldman, you know, some of them were first generation or, you know, fresh off the boat like myself, and really saw the fact that I had such a similar mindset as them. I always wanted to do something that the sky was the limit, and every day was completely different. And so with what we do, you went through the whole menu. It might sound like a lot to people. They're all around the same high-level theme of growth, but every day we're doing a different engagement. For our clients.

Okay, now compensation structures. It's interesting because it is something that's important but not talked about a lot, or at least it seems that many give it short shrift, arguably. Tell me about what is customary, you know, what typically happens, and you can make a distinction for larger firms and smaller, of course, and then where, you know, what added value are you offering here? What are people missing? Where is the opportunity?

Yeah, absolutely. The whole reason why I even started talking about compensation planning and how do you reward your people really stems from the fact that I could write all day long different sales manuals for teams. I could make the world's best website. I could write everyone's best messaging and pitch. But unless there's that internal motivation from the actual people within the firm, all of that is just going to be kind of like a car sitting in a garage. So I always say what we do, what we create is the car. We need the people on the team to start to be self-motivated. I go running 3 times a week. Not a single person tells me to do it. I don't do it so I could go into the marathon. I do it because I'm self-motivated. And my motivation comes from not, not, I'm not trying to lose weight, I'm not trying to win a marathon, but it's to do other things like listening to my music for self-reflection. So those are my inner motivations. And I'm really big on how do you motivate people to do things. And so one part of it is financial. Financial compensation, how do you structure it? But then the other part is non-financial compensation. So compensation doesn't just have to be with money. It could be to eat into people's or read into people's brain and what motivates them and be able to build out programs and different reward systems that will trigger them to want to do things without you having to constantly nag them to do it.

Right, and in terms of the incentive, I mean, everyone's obviously different. So you could say, oh, I'll pay you X amount if you run the New York City Marathon. Well, some people would be great, say great, because I actually do run it, and others would be like, you can offer me $10 million and I'm not going to do it. Exactly, right. So use that as a starting point though in knowing or identifying what really motivates people, and then how do you, how does that come to life financially in terms of how you structure incentives.

I think a lot of times what I see in the industry is very, very pro— you know, it provides a lot of high benefits without factoring in the length of time that it takes to close opportunities, the close ratio of the firm, meaning like, is this firm even sellable? Is their message strong enough? And are we looking into the sales personality of the different individuals within our teams? So one of the One of the first things I like to do is first put away the financial aspect of it. And the first thing I advise my clients to do is to take what we call the Select Advisors Rainmaker Test. That test has actually been created by our firm by looking at the data of all of the advisors that I've coached, consulted throughout the years. We started the firm in 2014. Who have been the rainmakers within their teams. And we look for common skill sets. And what we've realized is that there are pretty much about 12 essential skills that an individual needs to have, and if not, be groomed around to become really good at sales. Some of those could include, one would be wants high pay, but not every single person is in that. And we could talk about the financial compensation, but others are the person want self-improvement. So if you're seeing people who are top producers, they're typically picking up a lot of self-help books, even though they're great. They're typically picking up a lot of coaching books or reading a lot of your content because they just want to get better. A second— a third component is they are cause motivated. They're driven by things beyond money. You think of, you know, some of the biggest CEOs in the world right now, they are already billionaires. They don't need any more money. So what's driving them? And so finding what the causes behind someone. Another very strong essential skill that an individual needs to have is that they love recognition. For me, I feel like I would prefer to get, you know, they say that you seek fame. A lot of people want that visibility and being recognized that, hey, you made it. And so those are some of the essential skills. I mean, the list goes on and we actually have a test that someone could take of themselves and of their team. And then from there, the compensation would be to reward them around those skill sets. So for example, if they like self-improvement, provide them more coaching, provide them more training. If they are cause motivated, contribute a percentage of the assets that come in to the charity of their choice and so on. So that would be the non-monetary compensation structures that you could institute within your practice. Another one is loves influencing and is authoritative. I personally find myself— that's— you asked why did I leave some of the large firms. I love being authoritative, meaning I like to find things out on my own. I like to find out how to do things. So if you tell me this is our script of how we're going to do things, that will not fly well with a person who is authoritative. And you want an authoritative person to to be given that leeway to do things. Obviously not go rogue, but if I think my route to growing my practice is gonna be to go after women entrepreneurs, let me, don't stop me. And then it leads to another essential skill around sales, and one of them would be enthusiasm. If you've probably noticed, a lot of people who are highly successful are enthusiastic and passionate about what they do. Don't kill that within your practice. So if you see some people within the firm really excited about the future of the firm, double down on it, provide them some outlets that they could run with that enthusiasm, become ambassadors for the firm. If they love LinkedIn, for example, let them become the LinkedIn ambassador at your firm. So a huge part is really watering that enthusiasm skillset.

Was this your, your own creation or was it you and others like put your heads together and, and thought about this or were you inspired by someone, other company or someone already doing something similar or the same? What, what was the genesis of this?

I love that question. Yeah, you've probably obviously seen multiple different types of personality tests. And a few years ago, I was really lucky enough to find out about this one program, which is called Harrison Assessment. Harrison Assessment doesn't believe anyone is good or bad at anything. They test you around 125 skill sets that everyone has. And what they do is then, as a CEO or a manager, I could basically create for myself an avatar of what I'm looking for, for a specific job function or for a specific, you know, end goal. And so I've been working with Harrison Assessment and curating these types of tests. And so for, for what I did was I had them take this test from all the people that I told you were really superstars. And then I looked at what were they really high in., and that became my avatar, and I called it the Select Advisors Rainmaker Test. Mm-hmm. And then everyone else, like, I could take that test of you, Greg, and we'll see what percentage you are with that. We really wanna see people that are like above at least a 50% because then it gives us at least another 50% to coach and groom them on, compensate them effectively, and so forth.

Mm-hmm. So after the test is administered, you get the results, you have a follow-up conversation, I assume, where you share the results and you, you, talk it out, and presumably there aren't any major surprises. I'd assume it would largely mirror the personality and, you know, just the disposition of the person in question. Or sometimes there might be minor surprises within there, right? I mean, tell me what happens there.

Absolutely. Actually, this is so fascinating. It goes along with the topic that we're talking about, about compensation, because a lot of times the CEO, as I said, or the team head thinks that just giving financial rewards is it. But what we've realized is actually a lot of times their sales, quote unquote, people or the people that they want to get up with the help and provide more assets and bring in more assets. Many of them are not financially driven. So want high pay, which is one of the essential skills for the Rainmaker set, is actually very low. So what this means to the CEO is you're wasting your time trying to give, you know, should I give 50% or should I give 60% of the first year revenue? Don't worry about that. Look at the other components that this person cares about. For example, they could be a 9 out of 10 on cause-motivated. Find what their causes are, find what drives them about helping society, and contribute part of their revenue to, to that cause.

And I'd imagine a beneficial byproduct of this is that you would likely, on balance, have happier employees. And it would seem to me to help with employee retention as well. Because their values are aligned with, with what the company wants as well. So you're all on the same page, kind of.

Exactly. Yes. And if you look at each person individually as a whole and look at what they love and double down on that and continue emphasizing that, it causes what in that book Atomic Habits talks about, that people tend to do what they love to do, you know, and people procrastinate on things they don't love to do. So they become worse and worse at it. If you're able to really look at the person under the hood and see, wow, this person is really driven by wanting authoritative, you know, services or wanting authoritative responsibilities, they're going to want to come to work and do this on a weekend on their own, whether or not they're getting paid for it.

Yeah, it's so true. I mean, I used to work with someone in journalism who worked as a reporter and he blogged as well. And he just really, really, really flourished when given given the freedom to blog and do things on his own terms. And he was an exceptional journalist. But you, everyone, you have to figure out not just what you like to do, well, what you like to do and what you're good at. That's the ideal when both of them are there. So, absolutely. Yeah. It's sometimes it's just a tweak and then boom, the person can really blossom and flourish.

Yeah. So for me, you know, what I, as I mentioned, you know, want high pay, everyone, you know, who doesn't want high pay, especially with this inflation, right? But I think if you're able to look at some of the other things like, for me wants recognition. I don't like my work to go unseen. It dissuades me. It makes me feel demotivated. I'm like, ugh, blah, I don't want to do any more of this. And so you're basically making me not want to help you more versus if you're like recognizing what I did. It's like the same thing with a child. You recognize what they do good. You don't keep telling them what they're not doing good at. And so that if you're able to really do that, you could motivate people to do more of what you want them to do.

Yeah. In terms of these profiles or different personnel, I don't know what you want to— how do we characterize this?

This is called the Selectivizers Rainmaker Test.

Okay. So in terms of these different profiles in this test, are there any that are much more common nowadays? Are you seeing more momentum perhaps in those who crave recognition or those who might crave influence or authority? Is that just kind of a constant and doesn't really change over the years?

I think— well, I've seen a very common trend throughout the past, I would say, decade now that I've been doing this is one part that's been very surprising to me, although it probably shouldn't be surprising to us, that the people that we want to make the shift in mindset to go from servicing to sales, which is what each CEO's goal is, that's why they're probably listening to this. Has hired a bunch of people who are caretakers, who love taking care of people. So what does that mean? Inevitably, these people are cause motivated. They love to do something for the bigger than the whole. They are more like a nurse personality. And so that's one thing that's been very surprising to me because I thought you would, you know, you would want a lot of sharks in the game. But no, if you're able to really show them how what they're doing as far as getting new clients is causing, motivating you, that could be really helpful.

In some of your writing, I've noticed that you use the word sales in quotes, so in the spirit of not the traditional interpretation of, you know, hard sales, etc., that it's more you're selling but not in a, you know, in the historical manner. It's more of a soft sell by dint of you being committed to a cause. You're selling without selling, really.

Yeah, so that actually leads to the second component of what we were talking about, which is the compensation financially. But I think it goes into your question about sales. First and foremost, sales, yes, it's seen as a dirty word if you wanna look at that. Or you could look at it as the first line item in a P&L statement, revenue. Revenue equals sales, sales equals revenue. As Mark Cuban says, sales solves everything. You've got problems with staffing, get more sales, you'll hire more people. You've got, you know, your office is too small, get more sales, you'll get a bigger office. So sales solves everything. But I think the part that is very unclear when it comes to compensation is what about sales do you want? Because sales isn't just like more assets. Sales could mean more leads from your team and you'll close those opportunities. Sales could mean more referrals, but sales could also mean more wallet share from existing clients. Sales could also mean give me my time back, teammate, so I could go get new business and you maintain these assets. So that's really important. Sales could mean a lot of different things to people.

What else have we not talked about that you feel is important? Because we have a few more minutes, but I just want to make sure that your key points are being represented.

Absolutely. So one of the topics I like to talk about is, okay, so you want more sales, you want to find out how to compensate people financially. We've touched on how to motivate people by rewarding them on non-financial compensation. But let's take a little bit of time to talk about the creative financial compensations you could give to people. And that's where I think one key area you should do as a team or just as the CEO and the team head is step back and think of which component of sales you want more of. Let me give you a perfect example. Let's say you want just more leads from every 20 people on your team. You have 20 employees, you just want everyone to just provide some leads because right now a lot of advisory firms are spending dollars on leads only to underestimate that your own team can be a great marketing expense. So what we do in this equation is one idea I've shared with a lot of firms is start giving a cash bonus to each of your employees for just bringing in leads. Step back, let them be authoritative. You don't care where the leads come from. There are over 1 million millionaires in the US alone. There's never a shortage of leads. You don't know where, where to find leads. Look at the shirt you're wearing. Find out who made it, who made the thread, who makes the colors, where's the manufacturer. There are 4 leads just for you alone. You don't care where they get the leads. And as soon as they bring the lead in and the lead takes a meeting with your full team, because you're saying we don't have closing problems, we have lead problems, that employee gets an immediate cash bonus. We've done the calculation. I'm happy to share that with anyone. But if you're able to follow this strategy and you have a pretty good non-interested close ratio, That's important. You don't care about people who are interested. If usually you should have 100% close ratio with interested people, but if you bring in uninterested people because your employees are trying to, you know, do some work, and even if you have a 30% close ratio, we've found that the cost of acquisition for those leads to convert into clients is about $500. Compare that with the Kitsis research report of industry standards. That the industry cost of acquisition for a high net worth client or any client within the advisor community is over $3,000.

Yeah, the math seems pretty good there. And, you know, and I guess some of the leads who don't work out, even some of them, I'd assume, might put in a good word for you. Like they might be close enough to taking it, but they'll say, you know what? Oh, so you perhaps get referrals from there too on occasion.

Oh, absolutely. And what I love about this, Greg, is when I've presented this to people, I say, well, how does that compare to your cost of acquisition? A lot of people are like, huh? I don't know what is cost of acquisition. We don't know what that is, really. So first of all, this allows your team to start being actually much more mathematical about predicting the future of your practice. And two, it really starts immediately changing the mindset from within your firm from, you know, servicing. And yeah, if I find a rich person, it'll probably take 3 years before that person closes. To your entire team start thinking about the instant gratification of a sale, right?

They have more skin in the game and they're really more ambassadors. They're more emotionally invested as well, right? They're not just getting a paycheck. It's a little more— yeah, entwined, the relationship.

Exactly. Exactly. If I told you, you know, Greg, from this point on, for the rest of the day, find me a new high net worth individual. But each time you bring them to me and have them meet with me, I'm going to give you $500. Guess how your day's gonna change right away?

It's a deal.

Let's do it. Right? But if I said, Greg, bring me a lead, and if they close with me, I'm gonna give you, you know, a percentage of that. You're gonna have so many questions like, can Amy close? Is Amy's product good? What if I'm putting my reputation on the line? You may start doubting it. Your analysis gets in and you may not do what I want you to do. And then, We're back to square one again with the problem, right?

It's a little more going for a single, not hitting a home run. It's much more doable and manageable.

Yeah. Then it causes that habit to start. Yeah. And you're building your team to start thinking like salespeople.

Yeah, that's great advice. Well, you're kind of answering my next question, but I was going to ask you for an actionable idea that listeners could do on this count of, you know, creating compensation structures. Like anything extra you want to add?

Yes, absolutely. I think there are two things I wanna say as an action step. One is definitely step back and clarify what you mean by the word sales, because sales means different things to different people. Your receptionist can say, well, I'm getting sales because I was really nice to a little lady who walked in and I gave her coffee, so I kept the client. It could get very blurry if you're not being very clear. No, when we say sales, we want cold leads or we want wallet share or we want client retention. Just be very clear about it. From there, you could really mathematically, you know, mathematically figure out what the financial should look like. And then the second thing is increase your close ratio because like I said, if we're going to start paying people for bringing in leads or other compensation structures, it's important for us to be able to close as well. And then the final thing I do want to say, one thing we didn't touch on, is that all of the formulas and all the items we talked about today were all hypothetical, right? So I would need to really understand the culture of the firm because some firms are like, we don't want to cause, you know, boiler room mindset. We don't want to lose our employees by these. So all of those can be addressed when you're really thinking through a good compensation strategy.

Okay. Well, that was, uh, very helpful advice.

Thank you. Absolutely.

Thank you. Thank you. My guest has been Amy Parvana. For more advisor-specific podcasts, please check out barons.com/podcast. For The Way Forward, I'm Greg Bartolis.

This podcast was brought to you by Wells Fargo Advisors. Looking for a firm your clients can't outgrow? Wells Fargo Advisors offers financial advisors full balance sheet solutions. With wealth planning, investment products, banking, and lending that meet the needs of affluent to ultra-high net worth clients. Build your practice your way and on your schedule with independent and employee model options designed to meet your needs today and tomorrow. Learn more at joinwfadvisors.com.