Robert Schmansky started in the financial advisory business 14 years ago, earning some $50,000 after bonuses working with various firms.
“I always put in more than 40 hours a week because I wanted to learn,” Schmansky said.
The Michigan-based certified financial planner has since launched his own advisory firm called Clear Financial Advisors but he’s hesitant to hire full-time help to assist in growing his practice.
“I don’t have the income to pay an employee overtime,” said Schmansky.
The 37-year-old is among the financial advisors feeling the pinch of finalized revisions to the Fair Labor Standards Act (FLSA) that will extend protections to workers by raising the bar for overtime pay.
“With salary, benefits and new overtime pay rules that we have to monitor, it’s expensive for advisors to employ full time support staff,” said Alan Moore, the Montana-based co-founder of XY Planning Network, a virtual membership service for financial advisors.
The current overtime threshold is just $23,660 but that number will double on Dec. 1 to $47,476 after which nearly all workers earning lower salaries will be entitled to time-and-a-half pay whenever they work more than 40 hours in a week.
“Even employers who favored a wage rate increase didn’t expect such a significant jump,” said Nannina Angioni, a labor and employment attorney and partner with the Los Angeles-based law firm Kaedian.
Certified Financial Planner Robert Braglia says he will no longer be able to offer young people interested in the financial services industry an opportunity to learn about the advisory business if the minimum wage increases to $15 an hour.
For now, state lawmakers in California and New York agreed to implement a $15 minimum wage by 2022 and legislatures in Connecticut, Massachusetts and New Jersey are weighing similar measures.
“Staff in today’s employment environment want to be productive and earn more money but I cannot raise my rates for competitive purposes,” said Braglia who is a New York-based, fee-only advisor with $110 million assets under management.
According to Department of Labor data, the new overtime rules will impact 4.2 million Americans and financial advisory practices could soon find themselves requiring lower-level supervisors, managers and professional staff to maintain timesheets or to log in to a time tracking system even when they are telecommuting.
"The psychological impact of time tracking on the average professional worker is limiting to their growth,” said Diya Obeid, founder and CEO of JobDiva, a Software as a Service (SaaS) staffing solution in New York.
Delegating to independent contractors is one way financial advisors are planning to navigate around stricter labor laws.
“I am leaning towards outsourcing to another financial advisor because paying overtime is expensive,” said Schmansky. “They have experience, they know the software and I don’t have to train them.”
SimplyParaplanner.com and a job board maintained by XY Planning Network connect advisory firms with financial planners who outsource services that include data entry, building reports, placing trades, processing account applications, scheduling, financial planning, running projections and even marketing and book-keeper duties.
“The good news,” Moore said, “is that the Uber-fication of our economy is such that smaller advisory firms don’t have to hire full time employees anymore.”
Juliette Fairley is a business and finance journalist who has written four personal finance books for John Wiley & Sons and has written for major news organizations, such as The New York Times and The Wall Street Journal. She is a member of the American Society of Journalists and the New York Financial Writers Association and a graduate of Columbia University's Graduate School of Journalism. Juliette can be reached at firstname.lastname@example.org.
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