RIA Salaries on the Rise as Firms Pay Up for New Hires–Study
Advisors and employees at fee-only firms are taking home a bigger paycheck, in part due to an increasingly competitive hiring landscape, according to a study from Charles Schwab’s Advisor Services division.
“To draw and keep the best talent, firms must design attractive compensation plans,” Lisa Salvi, vice president of business consulting and education at Schwab Advisor Services, wrote in an email.
Portfolio managers and operations managers have also seen salaries rise 15% and 10% respectively to $173,000 and $101,000 on average as RIAs look to hire more investment support staff, according to the study.
To be sure, the rising stock markets have also been a boon for pay as the survey reported that over 60% of the investment roles received performance based compensation. But the hiring market has been driving up pay, Schwab said, as 42% of the 984 firms surveyed recruited employees from other RIAs to fill open positions and more than three-quarters, 76%, planned to hire more staff in the next 12 months.
“It’s not a shock that payroll is our biggest expense,” said Sam Huszczo, founder at SGH Wealth Management, a $185 million-asset Southfield, MI.-based RIA that custodies with Schwab. “It’s really hard to recruit, and that’s why you see compensation going up the way it has been.”
Lagniappes such as equity compensation have become more common. Forty-six percent of experienced advisors owned equity stakes in their firms, up from 38% in 2014. Health benefits are another key angle as 99% of firms with over $1 billion in assets and 96% of those managing between $500 million and $1 billion offered medical coverage.
Phil Fiore, who launched Shelton, Conn.-based Procyon Partners, in 2017 after leaving UBS Wealth Management USA, said that his firm will offer employee ownership stakes that they call ‘P-Shares’ in order to help land advisor and operations staff.
“That’s a key tenet of ours,” said Fiore. ”A lot more people want more than just a paycheck.”
Procyon, which custodies with Schwab and Fidelity Investments, has 14 employees, according to its ADV. The firm, which manages $3 billion in assets, the majority of which come from institutional clients, has grown with the addition of some members of Fiore’s former UBS team and new recruits such as a $420 million-asset advisor from another RIA in New York who joined last year.
Overall compensation at RIAs accounted for around 71% of their total revenue in 2018, down slightly from 73% in 2017, according to the study. Salvi said that firms should also consider benefits such as maternity and paternity leave and non-financial compensation such as flexible work from home policies and supporting philanthropic endeavors to help keep costs in-line.
“It’s especially important to understand how to design a competitive offer while taking your firm’s budget into account,” Salvi said.