RIAs have been bolstering their head counts this year, but not quite at the same pace seen in 2022 – and they’ve been increasing compensation and perks to help attract talent.
That's according to Charles Schwab’s 2023 RIA Compensation Insights report, which found that 75% of firms had planned to add staff in 2023, compared with 80% who said the same last year.
Since 2018, total cash compensation has increased by 17% among the 1,044 firms Schwab surveyed early in 2023. The data in the report cover 14,500 employees and 27 roles at RIAs.
“Competitive compensation is central to a strong employee value proposition and is a key factor to attract and retain talent in today’s market,” said a statement in the report attributed to Lisa Salvi, managing director of business consulting and education at Charles Schwab Advisor Services. “Investing in and developing staff is equally critical so that talent can move into new roles and rise in the ranks. Providing these career path and progression opportunities can help alleviate some of the talent shortage firms may be facing.”
The report found that high-performing RIAs are more likely than the rest to have written “employee value positions,” as well as certain elements in those documents compared with other firms. The more elite RIAs in the survey had mission statements for culture and values (82% versus 67% for all other firms with employee value propositions), stated career path documents (78% versus 64%), and coaching or mentorship programs (67% versus 54%).
Seventy-nine percent of the firms said they use performance-based pay incentives, covering three out of four roles. Twenty-seven percent of respondents said they tied compensation to revenue, with a third of roles paid that way.
Tying pay to performance correlates with higher growth, Schwab reported. Firms that use performance-based pay had higher five-year compound annual growth rates for assets under management (24% higher), revenue (19% higher) and number of clients (38% higher).
Further, 75% of RIAs said they offer remote work arrangements, and more than two-thirds provide fully paid parental leave.
While larger RIAs often use flashier incentives to attract advisors, like considerable amounts of money up front, midsize firms tend to be more creative, with office space, equity or marketing programs, said Jodie Papike, partner at advisor placement firm Cross-Search.
“There are all different types of things that RIAs hold out there as carrots,” Papike said.
Remote work is one of those carrots for staff, but “some people want to go into an office,” she said. “It can really go both directions.”
Increasingly, RIAs want to invest in their workers, Schwab found. While the top initiatives that RIAs reported this year were acquiring new business through client referrals, recruiting staff to build out capabilities and acquiring clients through business referrals, the sixth-most cited initiative was developing the skills and capabilities of staff, up from eighth last year. The “top performing firms” in the survey dedicate an average of $2,200 per employee on training, education or professional association dues.
By comparison, a survey of RIAs published recently by Fidelity Investments found top strategic initiatives among RIAs with $1 billion or more in assets were marketing and business development (69%), business planning and execution (60%), investing in tech (52%), improving client satisfaction (29%) and succession planning (18%).
Firms are also changing up the places where they look for new employees, Schwab found. While more than half, 56%, indicated that they recruit through personal or professional networks, 37% said they go to colleges and universities in search of talent, and 27% said they scout other RIAs. The same report last year found 34% recruiting from colleges and 33% from other RIAs.
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