Bogart Wealth to give equity to all employees by end of 2025

Bogart Wealth plans to offer equity to all employees by the end of this year, the CEO of the fast-growing Virginia-based RIA told InvestmentNews.

“At the end of this year, every employee is going to have equity and part of annual compensation will include profit interest rates going forward,” said James Bogart, who scaled his firm from roughly $600 million in 2020 to over $3 billion AUM today.

Bogart’s team currently spans 55 employees, including 12 advisors and 4 associate advisors. Compensation is set into two structures. “Advisors get paid a percentage of the revenue that they're responsible for, and that percentage changes based upon the size of the revenue. For non-advisors, it's a base plus bonus type of compensation model,” Bogart said.

Bogart is the majority owner of his firm, which took minority investment from Constellation Wealth Capital in January. Bogart Wealth’s shift towards employee equity is part of a broader trend in the RIA space that’s seen firms such as Mercer, HB Wealth, Snowden Lane, &Partners, and Steward Partners roll out similar models to recruit and retain talent.

“It is a very competitive market for human capital, I call it the war of human capital right now,” said Bogart. “If you're not getting compensation right, and you're not giving them pathways to grow and create value for themselves, they're going to leave.”

Bogart Wealth has had minimal attrition, losing just two employees over the last three years. Despite industry-wide concerns of fee compression for advisors, Bogart says his firm increased fees last year while expanding its client services around taxes, trusts, and estate planning.

The rising costs to keep talent has led to margin compression — a profit decline — for Bogart Wealth, whose advisor offices in Virginia and Texas specialize in serving clients from the oil, defense, and technology industries.

“When I look at how much my payroll has increased over the last five years — yes our assets and revenue have increased, but they've not moved in parallel. Payroll has actually gone up faster than the AUM and revenue have,” said Bogart. “The best of the best [advisors] rise to the top, which makes them a target candidate for others to try to poach them from you.”

In 2021, Bogart launched an Advisor Growth Track as an on-job mentorship and training program for early-career advisors. “We had 89 people apply for four spots last year. So it's clearly a product that is in high demand and it's really captivating to that next generation advisor.”

The RIA’s growth to date has been entirely organic through growing client relationships and attracting new clients, which Bogart credits in part due to the firm’s daily financial education content production. “We're giving it all away for free,” he says. “And that's working because what it allows us to do is, our clients can introduce their friends in a very soft manner without a solicitation. Their friends can introduce their friends, etc.”

Bogart’s stated goal is for his firm to hit $22 billion in AUM by 2033. He anticipates starting to soon enter the M&A market to help reach this mark.

“I'm going to probably look at debt first if I needed additional capital before raising additional capital,” he said regarding plans to finance M&A growth. “We're blessed to have a pretty strong balance sheet right now. It depends on the size of the transaction. I just think for all shareholders, it's better to do [debt financing], especially with the growth rates that we've been experiencing. We'll outgrow whatever the interest rate is that we're borrowing.”