Paul Heath (left) and Quentin Reeve

The greatest risk for advice practices bringing on Professional Year advisers is making an investment in non-revenue generating employees who then become attractive to recruiters for other firms once they finish their training commitments.

But one of the country’s leading wealth firms, Koda Capital, believes it has found a way to create an attractive career pathway for its PY advisers, and to retain when they become revenue generating by offering equity stakes as those employees progress in the company.

Koda’s “Pathway to Partnership” program currently includes a dozen staff either doing their PY or soon to commence it, with six others that have completed the program and are now advisers.

Koda founding partner and CEO Paul Heath said that when the firm started a decade ago, the goal was to build an “enduring” business model.

“It’s a forever firm and the principle was around a professional services model [rather] than a traditional advice model,” Heath says.

“The idea of partners nurturing the next generation of partners was in our DNA. We knew to do that you had to get to a certain level of scale so that you could invest back into that, because growing your own talent is the best talent, and it’s the most expensive talent.”

The firm’s chief of staff Quentin Reeve – known as Q and described as the “hidden hero” of the business by Heath – previously worked with the now-Koda CEO at Goldman Sachs and JB Were. Reeve has been at the company since the beginning and has primary responsibility for the program.

“Everyone at the firm today has equity, it’s at different levels of seniority,” Reeve says.

“You don’t have to complete that PY and you don’t have to be an adviser to get a piece of equity to begin with – as soon as you hit your 12 months first year anniversary you get that first tranche of equity coming your way and that helps retain the top talent.”

Planning ahead

While giving equity stakes to new advisers seems like a generous deal, it also presents an opportunity for senior advisers to put an adequate succession plan in place.

Heath says advice firm principals have two issues to solve: who will buy their equity; and who will look after their clients.

“If you don’t have equity to sell you have to sell your book, but both of those things become out of reach for junior people,” Heath says.

“This is the problem for the industry. We’ve got a model that brings these people into the compensation pool early and in a structured way that allows them to build up their earnings so they can afford to buy the equity.”