Editor’s note: Don’t forget to sign up now for Debbie’s upcoming workshop on tax planning in New York, November 2–3, 2023.
Since the Covid experience, work from home (WFH) has been all the rage. However, at Taylor Financial Group (TFG), we believe strongly in the benefits of working shoulder to shoulder. We worked remotely for only a very short period of time in 2020, and returned to the office on a hybrid schedule by September 2020. We have since evolved to a Monday through Thursday office schedule, with Fridays scheduled for WFH.
We understand the desire for work-life harmony, but we also feel that it needs to be balanced against the benefits of in-person work, which creates organic conversations and spontaneous training opportunities, among other things. As an alternative to a more generous WFH schedule, we have tried to offer support and benefits to TFG team members in other meaningful ways. Following are five of our more creative approaches.
1. Offer a profit interests plan to provide equity exposure
Most advisors already offer their team a 401(k) along with a company match. Many also offer a profit-sharing plan. Although both of these tools can assist in retention, our match offers immediate vesting and our profit-sharing plan provides 100% vesting by the sixth year. So, how are we to retain team members and incentivize them beyond what is offered by these two more traditional approaches?
This is where equity participation enters the equation. It could be straight equity offerings, a traditional partnership route, or a stock appreciation rights (SAR) or profit interests plan (PIP). We have decided to use the latter, at least for now. Although both a SAR and PIP plan are very similar and allow much flexibility in their design, we chose a PIP over a SAR plan because we believe that the tax treatment is more beneficial for team members at the liquidity event.
The PIP allows us to custom design a plan where we set a distribution threshold and then allow designated members of the team to participate in the appreciation of the valuation of the firm beyond that set number of the distribution threshold. For example, if the distribution threshold for your firm is $20 million, and the firm valuation grows to $30 million, then the members of the firm can participate in that $10 million upside.
What is nice about this plan is that you can designate who participates, how they participate, the amount of money allocated to the bonus plan, and the timing of the vesting and awards. So the plan does amount to a form of equity participation, but with a lot of strings attached.
2. Join a PEO to provide additional ‘large company’ benefits
I have always been frustrated at the dearth of options for benefits available to me as a small business owner. I want to purchase competitive health insurance for my team members. I also want to offer additional benefits, such as an HSA and FSA. But much of this was difficult or impossible to access as a stand-alone small company. As a result, we reviewed joining a professional employer organization, or PEO, which allows us to pool together with other small companies to gain the leverage and cost savings of a larger company.
We joined the Paychex PEO, and we are already seeing benefits. Our payroll and benefits administration has become greatly streamlined, costs have been reduced, and we now have several specialists that assist us with everything from payroll, benefits, 401(k) administration and human resources. It does cost us about $200 a month per employee, but we will reap savings in our insurances and in our 401(k) expenses. In addition, my team will greatly benefit by accessing cheaper and more competitive health insurance, wellness plans, and even workplace discounts on products, services and travel.
3. Provide a wellness credit
We wanted to contribute towards wellness, and therefore we created a $1000 wellness credit for this year. It is different from a raise or a spot bonus as the money must be dedicated towards a wellness spend. However, we define wellness quite broadly to include a purchase of golf clubs, a facial or even a plane ticket for vacation. We believed that our team members would enjoy a wellness credit more than a $1000 spot bonus or raise that would be used to pay down the mortgage or for some other necessary expense. Instead, a $1000 wellness credit can be a real morale boost because it virtually requires your team members to treat themselves in memorable ways.
4. Enhance professional development opportunities with conferences in cool places
We often hear about investing in our team members and providing additional educational opportunities. Unfortunately, for the last several years, many of those opportunities have been limited, especially in-person conferences. But conferences are coming back, and that offers a great opportunity for you to support your team in obtaining more education and accessing networking opportunities.
This year, we are inviting members of our team to at least two different conferences, one in Nashville and another in Orlando. The team members who are invited to attend these conferences are already very excited, although the conferences are still several months away. That’s good for morale. It may be time to rethink your professional development spend, and consider how best to support your team members whether that is through sending them to conferences, paying for their CFP or making other desirable choices.
5. Consider a team retreat
To reward your team and provide a bonding opportunity, consider a team retreat. We did this years ago once we reached $100 million. At the time, I took the team to Disney World, and we had an amazing time together. I still think about being with the team there and the fun we had.
Some team retreats are more work-oriented and focus on specific team-building activities with coaches and facilitators. Other team retreats may focus on relaxation and downtime. I believe that the team retreat should be geared towards the needs of your team and the vibe of your firm. There’s no right or wrong answer here as long as it excites and motivates your team.
Fast forward to today, and our team is larger and includes different members. In addition, our AUM has increased significantly, and I am looking for another motivation for all of us. I have promised the team a group retreat once we reach a certain AUM threshold, which I anticipate happening about 12 months from now. We are already starting to plan that trip and the team retreat serves as another inspiration for us to work hard towards our common goal.
The bottom line here is that you want to support your team in a number of ways. Some people will be very excited by reasonably priced health insurance, and others will be very excited by a wellness credit or attending a conference. One approach will not work for everybody, which is why it is important to be creative and provide a series of interesting perks. Providing challenging work, a mission that your team believes in, and strong benefits will enable you to attract and retain great team members.