Justin Gilmour

The introduction of employee share schemes (ESSs) can be key in the retention of talent, but whether it’s the best option for all advice businesses depends on the specific model.

ESSs are becoming more common as advice businesses recognise the benefits to both the company and the advisers.

Integro Private Wealth recently introduced its own version of an ESS, with financial adviser Bryce Wild coming on board as a company shareholder.

Integro managing partner Justin Gilmour tells Professional Planner there are several benefits to the adoption of an ESS.

Gilmour says a key reason for introducing this type of scheme is that it helps attract and retain talent, as well as ensuring continuity with clients.

“In wealth management, obviously it’s about a long-term relationship, so the retention of your team is critical,” Gilmour says.

Gilmour considers an ESS as a “factor for our recruitment”, but concedes introducing similar schemes are much more difficult for smaller businesses as “scale is the challenge”. Gilmour estimates businesses need at least 10 staff before it can be considered.

“We’ve got a number of [small firms] that are actually recognising that they don’t have the scale themselves, so they’re looking to merge with us,” Gilmour says.

“We’ve got a number where they might be a good adviser but [have] four or five staff – that would be very challenging to implement an employee share plan…it’s more difficult for a smaller firm to offer it.”

Gilmour says as part of a merger, there would be “a valuation done on their business and on ours” to establish potential shares.

Furthermore, advice businesses might struggle to create a lasting structure for an ESS which deters them from establishing one.

“The intent might be right, but I think it’s also structuring it and pulling it together, which I think is a hurdle, and then often doesn’t eventuate and then it doesn’t work,” Gilmour says.

Gilmour also notes that if a financial planning business has significant debt that has come with the acquisition of other businesses, the implementation of an ESS will be much more difficult.

“[In] our business, we don’t run on any debt,” Gilmour says. “We’ve always grown organically. This growth has come from mergers, which Integro will continue to do.”

Integro will also continue to offer employees equity stakes in the company, which will include employees from companies that have merged.

Gilmour explains that this works by diluting their shareholding. “We would have a smaller piece of a much bigger pie”.

Despite the potential challenges of using an ESS, they still present a great opportunity for advice businesses that can keep building a solid foundation for the future with the retention of valuable employees and clients.

This opportunity can also make a firm more attractive to future advisers, such as Professional Year advisers.

Earlier this year, Koda Capital created its ‘Pathway to Partnership’ program which intends to create an attractive career pathway for its PY advisers and retain them as they progress in the company by offering equity stakes.

“The firm becomes stronger and more robust if we’ve got people with skin in the game,” Gilmour says.

The benefits of an ESS or similar are not only for the company, but also the advisers. Advisers offered equity shares gain financial benefits and security. It is a way to reward long standing and valuable employees.

“It gives [advisers] a solid pathway, locks in their financial certainty and they can benefit from the scale of a larger firm,” Gilmour says.

Join the discussion