Creating competitive advantages in a crowded market for RIA talent

Article

February 25, 2021

By Meredith Richard, Senior Manager, Communications 

The independent advisory space is one of the fastest growing segments of financial services and now stands at almost $6 trillion in assets under management according to Cerulli.1 Against the backdrop of this impressive momentum in the industry, attracting and keeping great people is increasingly critical for firms.

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“When firm leaders are having conversations about their purpose, values, and vision for the future, it’s incredibly important that they recognize the talent they employ is inextricably linked to their long-term success. High-quality employees can help foster firm culture, provide a consistent client experience, and drive organic firm growth, especially during uncertain times like those we are experiencing now.”

Lisa Salvi, Vice President, Business Consulting & Education, Schwab Advisor Services
Lisa Salvi

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Attracting, motivating, and retaining superior staff in the current environment requires a competitive compensation strategy. According to Schwab's 2020 RIA Benchmarking Study, three-quarters (75%) of firms hired staff in 2019, with the median firm hiring two new staff. Further, 39% of firms recruited employees from other RIAs.2

According to Salvi, “a well-articulated strategy for compensating staff can be a huge differentiator for firms in the competition for top talent.”

In addition to salary, 77% of firms compensated staff with performance-based incentive pay,3 and 28% of firms tied compensation to revenue generation. Together with health benefits and equity sharing, these components comprise a competitive compensation package. Firms can also offer clearly defined career paths to younger employees, maternity and paternity plans, flexible work policies, and programs to support employees’ philanthropic endeavors.

According to Salvi, “firms that outperform maximize their human capital investment, creating a cycle of opportunity that attracts and develops high-performing talent. At the same time, optimizing organizational structure enables firms to efficiently deliver an exceptional—and memorable—client experience.”

Firm equity is also an important part of compensation, especially when it comes to retaining talent and supporting firms’ succession strategies. For the median firm, 31% of staff held equity in 2019.4

“For many firms, sharing equity is about fostering an ownership mindset,” Salvi said. “Even if transitioning equity starts purely as a talent retention strategy, it can also ultimately help provide succession options as it ensures employees take an active role in shaping the future of their firms.”

Salvi added firms that take the time to focus on intentional compensation strategies and thoughtfully incorporate them as part of their value proposition for new and existing hires can distinguish themselves from their peers and ultimately benefit in the long run.

Advisors can learn more about compensation strategies in the 2020 Schwab RIA Compensation Report, part of Schwab’s annual RIA Benchmarking Study.

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1 The Cerulli Report, US RIA Marketplace, 2020.

2 Hiring data represents all firms with $250 million or more in AUM.

3 Performance-based incentive pay includes discretionary bonus, compensation resulting from firm goals, department or team goals, and business development results.

4 Based on data from the 2020 Schwab RIA Compensation Report.

Past performance is not an indicator of future results. 2020 RIA Benchmarking Study from Charles Schwab, fielded January to early April 2020. Study contains self-reported data from 1,010 firms in the main study and 761 firms for the compensation portion. Data was collected on nearly 10,000 employees across 27 roles. Participant firms represent various sizes and business models categorized into 12 peer groups—7 wealth manager groups and 5 money manager groups—by AUM size.

Schwab Advisor Services™ serves independent investment advisors and includes the custody, trading, and support of Schwab.

Independent investment advisors are not owned by, affiliated with, or supervised by Schwab. For informational purposes only.

©2021 Charles Schwab & Co., Inc. (“Schwab”) All rights reserved. Member SIPC.