SESSION TWO WORKBOOK

Impressionist Decisions and Notes for Modules 1 – 5 BSMARTer

Business Simulation Management and Relationship Training

MODULE 1

Organizational Structure and Compensation

Service Team Structure

Example diagram of service team structure.

Lead Advisor Associate Advisor Client Service Administrator 1

Service Team Structure

Draw a picture of your service team structure.

Team 1

Lead Advisor Associate Advisor

Team 2

Lead Advisor Associate Advisor

Team 3

Lead Advisor Associate Advisor

There will be 8 teams

CSA CSA CSA

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Service Team Structure

Provide an explanation of your service team structure.

• • We have created a team structure. We currently have 8 teams. Each team has capacity for 120 client relationships. Currently we have excess capacity as each team manages approximately 100 relationships. In addition to the client facing team structure, we feel we are large enough with 8 teams to benefit from matrix management across each of the three roles identified.

One goal we have with the Team Structure is to create leverage. The role of the Associate Advisor is to handle many of the client interactions in order to free up the Lead Advisor’s time to work with (and prospect for) larger clients. The same principle applies to CSA’s. We’d like our CSAs to handle nearly all of the administrative duties in order to allow our Associate Advisors and Lead Advisors to focus on client facing activities. We continuously look for opportunities to insert lower cost of labor to handle our less critical tasks.

• • Although the matrix management does add some level of bureaucracy and costs, we believe the benefits in sharing best practices and creating a consistent client service model across each of our 8 teams outweigh the costs. We also believe it allows us to better define (and control) job descriptions and more actively manage our people Additionally, this structure enables CSA’s as well as Associate Advisors the opportunity to work with different Lead Advisors and Junior Partners helping with cross training, knowledge sharing and career development. We believe this feature will be critical in addressing some of the poor morale amongst the junior staff.

• Again, each team is responsible for up to 120 client relationships. We’re currently under capacity, with each team covering approx 100 relationships. We recognize this excess capacity will cost us a couple of percentage points in operating margin, but we’ve made a conscious decision not to lay off additional staff. We feel it would be more costly in the long run to have to “re-hire” many of these same people down the road.

• Lead Advisors – Responsible primarily for business development. Run the annual client review and have final decision making for client portfolios. They also help with the development of Associate Advisors and CSAs.

• Associate Advisors – Assist lead advisor, answers client inquiries on portfolio and day to day wealth management issues • • Client Service Administrators – Handle regular maintenance and servicing We let 1 Associate Advisor and 1 CSA go due to poor performance evaluations and client feedback. Revenue saved here will be deployed to address some below market salary issues that the firm faces.

* See initiatives regarding bloated staff issues 3

Compensation Benchmarking

Determine base compensation for three employees in your briefing book. Complete the task using the next two pages.

Wealth Management Junior Partners

Position Salary Bonus Total

Your Lowest-Paid Employee $74,561 $10,439 $85,000 Your Highest-Paid Employee $236,842 Mid-range Benchmark Median $105,263 $175,000 Benchmark Third Quartile $250,000

**Total includes Salary, Bonus and Perks

$33,158 $14,737 $46,000 $77,000 $270,000 $120,000 $240,000** $380,000** 4

Compensation Benchmarking

Determine base compensation for three employees in your briefing book. Complete the task using the next two pages.

Wealth Management Lead Advisors

Position Salary Bonus Total

Your Lowest-Paid Employee $241,228 $33,772 $275,000 Your Highest-Paid Employee $289,474 Mid-range Benchmark Median Benchmark Third Quartile $254,386 $40,526 $35,614 $330,000 $290,000 4

Compensation Benchmarking

• • • • • What changes, if any, will you make to compensation?

Address dramatic salary disparities for Lead advisor and Junior Partner salaries based on: • Benchmarking study and market rates for specific roles • Tenure with the firm • Experience and designations • • Number of clients and size of assets the advisor is covering Job descriptions and specific roles and responsibilities • Clarity on Bonus weightings and factors Make salary a smaller percentage of total compensation and increase bonus opportunity as a percentage of total compensation for Junior Partners and Lead Advisors. To be consistent with our compensation philosophy, we will pay salaries at mid range of the market rate. Employees can make it to the top quartile based on their bonus pay out.

Create salary and bonus structure for Senior Partners based on actual roles and responsibilities. We must have a clear delineation between salary and bonus. Salary will be performing the duties of your job, bonuses will be awarded for above and beyond performance.

We will address Junior Partner role and title and determine which of them should be Lead Advisors based on their role. We believe it’s important to make sure we have consistent and well understood job titles. By doing this, we think it will help address some of the current dissatisfaction amongst employees around perceived unfairness in compensation.

We currently have a number of Lead Advisors with 85% of their income coming from salary and a salary level in the top 10% (based on benchmarking data). This is inconsistent with our compensation philosophy and needs to be addressed. More of their total compensation will be shifted towards a bonus structure. Due to the sensitivity around this subject (we want to be careful not to lose a Lead Advisor) , this will likely be phased in over a two year period.

• Not immediately, but over time we would like to become more transparent with our employees regarding compensation. We first feel we need to address some of the discrepancies and further clean up job descriptions and titles.

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MODULE 2

Staff Selection and Performance Management

Job Advertisement

Design a job ad for the position specified in your briefing. (20 minutes)

Don’t have to do this page

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Performance Evaluation

Design a performance evaluation form for Lead Advisors

Job Factor Explanation

1. Business development (50%) 2. Client satisfaction (25%) 3. Team management/development (15%) 4. Firm contribution (10%) New clients, new revenue, COI contacts and development, Client retention and client satisfaction survey/NPS scores How well are you helping develop AA’s and CSA’s. Team player, corporate responsibility, community involvement Notes • • Performance evaluation above is for Lead Advisors. AA’s and CSA’s will have slightly different factors and weightings. For quantitative measures (for example business development), Lead Advisors will also have access to a dash board that will provide them with real time data as to where they stand.

Describe how the form will be used.

• • Performance evaluation with the four factors listed will be reviewed and discussed with manager quarterly. Employees should know exactly where they stand and there should be no surprises at year end. In addition to quantitative measurements, managers will qualitatively rate their direct reports on each of these four measures on an annual basis 7

Performance Evaluation

Design a performance evaluation form. Follow the worksheet. (20 minutes)

(this is for a Associate Advisors)

Job Factor Explanation

1. Business development (25%) 2. Client satisfaction (50%) 3. Team management/development (15%) 4. Firm contribution (10%) New clients, new revenue, COI contacts and development, Client retention and client satisfaction survey/NPS scores How well are you helping develop Lead Advisors and CSA’s. Team player, corporate responsibility, community involvement Notes • Performance evaluation above is for Associate Advisors. Please note, we are re-naming Service Advisor to Associate Advisor.

Describe how the forum will be used.

* Same as above (See Lead Advisor roles) 7

MODULE 3

The Culture of Your Firm

Organizational Culture

Describe the culture of your firm. What changes would you make? How?

Today the staff and the partners are disconnected. Compensation disparities although not openly disclosed are impacting employee morale. Some lead advisors make dramatically more than some of the junior partners and the value of being a partner is openly questioned. In general the staff is a laid back compared to the hard charging nature of the Senior Partners. The staff do not aspire to have lifestyles similar to the Senior Partners (perceived as workaholics) and the partners don’t understand the lack of ambition demonstrated by certain members of the staff.

Future state: Culturally we’d like to become more transparent. This includes transparency around the vision of our firm, the goals of the business, the performance of the business, employee expectations, rewards of partnership, career opportunities and levels of compensation for various roles and responsibilities.

Impressionist Inc will be a place that accepts those interested in work/life balance and those that are highly ambitious and driven. We understand this will require and lead to various levels of compensation and we accept that. We will financially reward those individuals who make the greatest contribution to the firm. While we will welcome those seeking a work/life balance, Associates will be expected to do excellent work and contribute to the firm’s mission, vision, financial well-being. Team members that don’t buy into the culture and vision (or contribute to our financial well-being) will be managed out quickly. We’re going to work with our Fidelity Relationship Manager and Practice Management consultant to understand how to more effectively work with employees that are Gen X, Y and Millennials.

We will also revisit two areas: 1) Our hiring process – can we do a better job up-front of identifying the right fits for our firm? 2) Employee on-boarding – what is the best way to train and indoctrinate new employees to the Impressionist Culture. What does it mean to some day be a Partner?

**For purposes of this exercise, we have focused on the Wealth Management portion of our business. We realize we have not yet addressed potential cultural issues created between our two business lines: Wealth Management and Investment Management.

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MODULE 4

Incentive Compensation

Partner Compensation

Design Advisor Bonus Plan • We will not be offering the 50% upfront bonus for internal advisors for referrals to the Investment Management side of the business as it creates a “dramatic” conflict if interest. In certain cases, where the growth opportunity and economics warrant it, we will consider offering the 50% upfront bonus to external Advisors and certain COIs.

• Part of our effectiveness on the Wealth Management side is our objectivity. Although at the firm level we still have a conflict of interest when our WM side utilizes our investment products for client portfolios, we feel that it is a conflict of interest we can currently manage and it has no impact on a Lead Advisor’s salary or bonus. From a salary and bonus perspective, we feel it’s important for our Lead Advisors to maintain their objectivity.

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MODULE 5

Partner Compensation

Partner Compensation

Set the base compensation for your partners.

• • We’re going to have a salary that compensates partners based on their job responsibilities. All partners will receive a base salary that pays them a median level market rate for doing their jobs. Consistent with our compensation philosophy for all of our employees, bonus payments (which will be paid for contributions above their job responsibilities) will allow our partners to “potentially” be compensated in the top quartile We will utilize several benchmarking studies to set market rates.

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Partner Incentive Compensation

Create, discuss and define incentive compensation for partners.

• Partner incentive compensation will come in the form of their bonus payment and well as a dividend on their partnership shares. Individual incentives will be primarily covered through salary and bonus while firm level incentives will primarily be met with dividends and increased value of their partnership shares.

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4.

5.

6.

Other Initiatives

Describe any other initiatives you will undertake as a firm. These may be outside of the scope of compensation and people but may be important parts of your case.

Initiative

1. Explore separating the two business lines.

2. Firm valuation

Explanation

Meet with Ensemble Group to determine pros and cons of two separate business lines. Independent valuation on WM and IM business every two years. Help with articulating value of partnership.

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