In the world of financial services, compensation models vary widely. One of the most common—and often misunderstood—is variable compensation. At 49 Financial, we believe in transparency about what this model entails, both in terms of its potential rewards and the inherent challenges it presents.
Compensation structures in financial services typically fall into three categories:
- Base Salary: A fixed income providing stability, often with limited earning potential.
- Variable Compensation: Earnings tied directly to performance, offering higher potential rewards with increased risk.
- Combination Model: A blend of base salary and variable compensation, providing a balance between stability and performance-based earnings.
At 49 Financial, we utilize the variable compensation model to align our advisors’ incentives with client success. This approach encourages advisors to develop their skills and build meaningful client relationships while offering significant growth potential for those who thrive in a performance-based environment.
So, let’s talk through Variable Comp
Variable compensation is a structure where earnings are tied to performance. This means that instead of receiving a fixed salary, financial professionals earn based on the value they create for their clients. This model is common across the financial services industry but also seen in other performance-based sectors like real estate, consulting, and tech startups. It’s designed to reward drive, effort, and results. But with that upside comes the need for adaptability and resilience. In other words: it’s not easy, and it’s not for everyone.
Why Do Financial Firms Use Variable Compensation?
At 49 Financial, incoming financial professionals are W-2 employees. We pay for licensing and provide extensive training to equip our professionals for success within this model.
One of the realities of a variable compensation model is that it’s not the right career fit for everyone. Success requires resilience, adaptability, and a willingness to navigate the ups and downs of performance-based earnings, and these roles inherently come with higher attrition rates compared to fixed-salary positions. This is not unique to 49 Financial, but a characteristic of the industry as a whole.
At 49 Financial, we acknowledge these challenges and do everything we can to set our advisors up for success. We offer structured mentorship, ongoing training, and a collaborative culture designed to help next-gen talent maximize their potential. However, we also recognize that, despite these efforts, not everyone will find this model to be the right fit for them—and that’s okay.
While we can’t change the nature of variable compensation, we can—and do—strive to make it as accessible and supportive as possible. Here’s how:
- Comprehensive Licensing Support: We cover the cost of required licenses to remove barriers to entry.
- Training & Development: Our structured programs ensure new professionals are equipped with the skills and knowledge they need.
- Industry-leading Programs, like the Draw: We offer incoming financial professionals the opportunity to unlock ‘the Draw’ – This program is designed to provide an advancement of future expected revenue. We understand that it takes time to build your client relationships and book of business. This program allows incoming advisors to get money in their pocket earlier in the career if they are hitting agreed upon metrics.
Embracing the Challenge, Unlocking the Opportunity
Variable compensation is not a one-size-fits-all model. It requires dedication and persistence but offers significant rewards for those who embrace the challenge. At 49 Financial, we’re committed to supporting professionals in navigating this path, providing the tools, resources, and culture needed to help them succeed.
Understanding the realities of this model allows individuals to make informed career decisions. We encourage those considering a career in financial services to evaluate their goals, strengths, and motivations to determine whether a performance-based structure aligns with their aspirations. A career in financial services can be demanding, but for those willing to put in the effort, the potential for personal and professional growth is limitless. And at 49 Financial, we’ll be there to support you every step of the way.
49 Wealth Management, LLC d/b/a 49 Financial, is an SEC registered investment adviser. All investment advisory activities are performed through 49 Financial. All commissionable product sales are performed through and under the supervision of Oakwood Capital Securities (“Oakwood Capital”). 49 Financial and Oakwood Capital are not affiliated entities.
