Case StudyAutomating Compensation Enhances Back-Office Productivity for Northwest Financial Advisors
Discover how Terrapin Technologies’ compensation management solution enhances productivity for this nationally recognized wealth management firm.
Northwest Financial Advisors is a nationally recognized wealth management firm in the credit union industry. Based out of Herndon, VA, Northwest Financial Advisors provides financial planning and wealth management services throughout the Washington, DC metro area. A portion of the firm’s products and services are provided through a third-party broker-dealer arrangement with LPL Financial.
Northwest Financial Advisors was at a crossroads: increase staff or leverage technology to achieve its business goals. Finding a scalable approach was fundamental to supporting its growing team of advisors and assets. Recruiting elite advisors, effective management of books of business, implementing tranching systems, and facilitating advisor succession plans all played a role in the firm’s success. But without the right technology and tools, these activities proved time-consuming and required significant overhead.
Several of the firm’s wealth advisors had extensive books of business, to the point at which effectively serving their large volume of clients was a growing concern. To address this, Northwest Financial Advisors began using tranches to reduce the number of clients held by wealth advisors by transferring them to newer advisors with fewer clients. The firm had successfully used tranches in wealth advisor succession planning in the past and applied the same process of selecting specific accounts and transitioning them from one advisor to another in a series of steps (i.e., tranches) over three to five years, as the wealth advisor transitioned to full retirement.
While this had produced positive results, over time, the firm’s leaders found that it caused new challenges when processing commissions and a bi-monthly payroll. The accounting team was manually managing multiple tranches, complex advisor teams, numerous periods, and dates — all via spreadsheets. Although working, it took a single team member approximately 16-20 hours per month to manage. Additionally, there was a high probability of mistakes due to human error when entering data into spreadsheets. Northwest Financial Advisors wanted to continue growing its advisory team and expand its use of tranches to support succession planning. However, operating with the same manual processes and reliance on spreadsheets would require increased staffing to meet these business goals. Instead, the firm wisely opted to invest in technology.
Terrapin’s platform enhanced Northwest Financial Advisors’ back-office and accounting processes by aggregating RIA and broker-dealer data, providing its team with an automated and centralized system for compensation, sales reporting, and general ledger accounting.
- Terrapin’s sophisticated data loader application automates the bulk import of complex data sets directly from LPL Financial. This works especially well for Northwest Financial Advisors as its business requirements specify the daily integration of LPL Financial data feeds, including broker-dealer and advisory data sets.
- With Terrapin’s automated solution, system payout grids facilitate the management of multiple grids and payout rates for an advisor. It supports advisors with multiple rep codes, each with different payout rates, by binding a specific rep code to a payout grid. Additionally, there are tools to support the complex calculations required in advisory fee accounting, including firm overrides and “levelizing” advisory fees. This automation is critical as it needs to occur before tranche calculations.
- The tranches are administered via system grids that track the tranche series, advisors, accounts, start/end dates, and multiple changing rates. Once a tranche is configured, the process automatically runs during each payroll cycle. These tranches are tied to a specific grouping of accounts, and the compensation is shared for a period of time. For example, in tranche year one, advisor A receives 75% compensation, and advisor B receives 25% compensation. In tranche year two, advisor A receives 60% compensation, advisor B receives 40% compensation, and so forth.
Prior to partnering with Terrapin, Northwest Financial Advisors had good results with their internal processes and solutions. However, in order to remain competitive and attract elite advisors, there needed to be a combination of strategies in play, yet, they faced increasing overhead and the potential risk of error. With Terrapin, the firm now has the freedom to leverage multiple strategies to attract and retain advisors. There is newfound agility in adjusting compensation plans and tranches with increased accuracy. Not only did the firm avoid increasing its accounting staff, current employees are also spending less time on manual processes. Terrapin’s automated and flexible platform supports continual change and enables scalable growth for Northwest Financial Advisors.
“Working with Terrapin Technologies has delivered enormous value to Northwest Financial Advisors. Without having to hire additional staff to process spreadsheets manually, Terrapin’s technology supports our crucial need to quickly and accurately manage advisor compensation. The technology truly is a win-win for us, and we are delighted to have found a solution through Terrapin that will help propel the future growth and success of our firm.”