Not even the registered investment advisory industry avoided the labor shortage that has plagued businesses across the country emerging from the pandemic.
Eight in 10 RIAs planned to hire in 2022, with firms looking to hire an average of six new roles over the next five years, according to Charles Schwab’s latest RIA Compensation Study. Without even taking into account attrition, retirements or new firms, Schwab expects the industry will need to hire at least 70,000 new people over the next five years just to keep up with current growth rates.
The Compensation Study is an addendum to Schwab’s annual RIA Benchmarking study and reflects data collected from more than 13,500 employees across 971 firms during the first quarter of 2022.
Recruiting new staff was named the top strategic priority for RIAs, beating out client acquisition for the first time in the study’s 16-year history, but attracting talent is still difficult for many firms, said Lisa Salvi, managing director of business consulting and education at Charles Schwab Advisor Services.
“There are still a lot of open roles at these firms and they need to be competitive with compensation,” Salvi said. “The cost to acquire new talent can be higher than what was traditionally the case because of scarcity in the labor market.”
Across all roles, total cash compensation increased 16% from 2017 to 2021, the study found. Compensation increased 6% from 2020 to 2021.
Firms are going outside of traditional channels to find talent. For example, a firm in Florida looked to the state’s robust hotel and restaurant industry to find people with client service backgrounds to fill customer support roles, Salvi said.
RIAs are also partnering with instituions of higher education to fill entry-level positions and internships with recent graduates. A third of firms reported recruiting new talent from colleges and universities, second only to personal and professional networks.
But messaging on firms' compensation and benefits is also important for RIAs to overcome the stigma that wealth management is a business driven by sales and commissions, Salvi said. Things like work location, flexibility and family leave are all increasingly important to attract talent.
Firms also need to use their digital presence and a compelling value proposition to show potential hires their company is a good place to work, just as they show potential clients. More than half (55%) of the top-performing RIAs in the study reported having a documented employee value proposition explaining what the firm can offer a new hire.
“One of the biggest things firms can do to stand out is have a signature program,” Salvi said. This can be anything from a month-long sabbatical offered to employees who stay with the company to offering summer Fridays off or equity in the company — anything that firm can give a name to and brand on their website to differentiate it from prospective employees.
Even though volatile markets mean revenues are down for RIAs that have assets under management-based business models, many years of robust growth mean firms are still looking to hire at a time when many industries are going through layoffs, Salvi added.
“RIA firms tend to gain market share in times of economic uncertainty,” she said. “Almost every time we have a difficult economic cycle, advisers provide that white glove service, educate [clients] and bring them through these periods.”
The RIA Compensation Study also found that the industry is getting more diverse, at least in terms of age demographics. People under the age of 40 account for 44% of employees, while those 40 to 49 make up another 22%. The remaining 34% of employees are older than 50.
The study did not publish data on gender and racial diversity, though Salvi acknowledged there is “plenty of work to be done.”
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