AFA Analysis

AFA Analysis


As an advisors develops their practices, at some point they may need to bring on another producer to continue growing. For many, the next step is hiring an AFA. But how should that person be compensated? A salary? A payout schedule? With a share of equity?

Advisors may not be aware of all the kinds of risks associated with bringing a new producer into the practice. Our AFA Analysis was designed to help advisors thoroughly plan and consider all aspects of their AFA arrangements before the most common mistakes are made. Our service includes two parts:
1) A consultation to review your specific AFA arrangements (employee/independent contractor) and risks you must be aware of when bringing a new producer into your practice (non-competes, equity, and more), and 2) A compensation design with a financial analyst to model different scenarios for compensation to help you build your compensation package for the AFA


Service Overview

Ensure that you are compensating your AFA correctly

Designing a compensation package for your AFA can be a challenging task. How can you structure a deal that is competitive, creates the right incentives, protects your practice interests, and fairly compensates your AFA for his/her work? It is definitely not a one-size-fits all solution. At KMG, we have helped countless advisors through this important transition step, helping them carefully design each aspect of this arrangement. We help them consider the following:

• Differences in risks/responsibilities between a W2 employee versus an Independent Contractor
• Franchise rules regarding equity sharing
• How to protect yourself from "bad breakups"
• Design of a customized compensation model for your specific situation (salary, payout grid(s), practice interests, bonuses, and more)
• Projecting this arrangement into the future to see the long-term viability and profitability for your practice
• Impacts to your succession plan

Key Areas Addressed

  • Business Management
  • Team Management
  • The Client Experience
  • Continuity & Legacy Planning

Service Provided

The AFA Analysis is a 2-part package.

Part I. Consultation with a Practice Protection Specialist who will cover:

• Risks/Benefits when hiring an AFA
• AFA position versus other licensed positions
• Classification of W2 vs. Independent Contractor
• Formally defining roles
• "Bad Breakups" and Limitations of Non-Competes
• Rules regarding Equity Sharing
• Recommended documentation for your situation
• How to establish your arrangement through corporate office
• And more...

Part II. Compensation Design - you will work with a financial analyst who will build a financial model for your AFA arrangement which considers:

• Type of AFA
• Estimated revenue managed and/or brought in by the AFA
• Behaviors you want to drive
• Costs of recruiting and supporting your AFA
• Incentives for financial planning
• Competitive deals or arrangements you need to match
• Your profitability
• How the clients will be shared
• Long-term equity arrangements
• Projected growth for the next 5-years

You will walk away with a written report and print-out of the compensation model.

Parties Involved

Advisor (Business Owner), Practice Protection Consultant, Financial Analyst

Service Frequency and Duration

Recommended frequency is once prior to the AFA hiring, and as needed to update the arrangements
Meetings: 90-Minute Initial Phone Consultation
60-Minute Phone Consultation to finalize the model

Expected Outcomes

Advisors will feel confident when making an offer to an AFA.

Our AFA Analysis provides:

•Written advice about your specific AFA arrangement
•Customized incentive model showing the advisor's profitability of the arrangement
•Written AFA-facing compensation model, showing the offer being presented
•Five-year projection of the AFA arrangement, and more...

How to Purchase This Service

Available for Ameriprise clients only: $1,395