The wealth management industry is risky business — unless you know what you’re doing. Even then, managing client assets is not for the faint at heart.

Fortunately, private client advisors are well-compensated for their work.

How private client advisors are compensated seems like an industry secret. The compensation might not seem straightforward because it is based instead on a complicated system of salaries and bonuses.

Each private client advisor’s salary and the bonuses earned are determined by client asset management and the firm for which the advisors work.

How Private Client Advisors Are Compensated

Earnings among advisors can vary greatly, but two standard compensation models are practiced today:

1. The first practice is to pay private client advisors according to a grid model. This payment structure is AUM-based, which means that the financial firm considers the advisor’s “assets under management,” or security market value. An increased AUM usually means an increased salary. An AUM-based salary plan is highly variable but has no cap on value. The advisor’s potential for earning is unlimited.
2. On the other hand, relationship managers in the private banking space take home a base salary augmented by bonuses. The compensation package is similar to other banking compensation structures. Many advisors prefer the predictable income of receiving a salary combined with intermittent bonuses. However, their earning potential is far less than that of a private client advisor working under AUM compensation. Choosing to work under AUM compensation can mean earning as much as two million per year — or more if client portfolios grow or remain stable.

If you are considering a private client advisor position, it’s recommended that you discuss pay structure preferences with your recruiter before accepting interviews with firms.

Your recruiter can steer you toward firms offering the compensation package you’re most comfortable with.

The Numbers Behind Private Client Advisors Compensated  

While a handful of private client advisors earn millions of dollars annually, most advisors earn between $109,600 to $164,4000. Their median salary is $137,000.

How private client advisors are compensated will likely remain a mystery to outsiders, but one thing is for sure: the private wealth advisors who excel in their positions stand to earn a good salary and bonuses because firms want these advisors in their employ for as long as possible.

The right fit between an employer and a private client advisor is critical to the success of everyone involved.

Are you just starting out in the commercial banking industry or are you planning to switch roles? The Anderson Search Group can help you find the company that’s the right match for you.