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Report Outlines COVID’s Impact on RIA Firms


A new report suggests that COVID has had a negative impact on RIAs—with a negative impact on cultures and employee engagement—and a resulting negative impact on retention. There were, however, some positive signs.

Indeed, DeVoe & Company’s 2021 RIA Talent Management Study (its second annual such report) points out that not only will the new and evolving “remote-work” paradigm shift create “workplace dissonance” within RIAs for the next several quarters or even years, COVID also led to RIA firm leadership increasing communications with their staff, and during COVID, employees delivered overall productivity gains.

In fact, the DeVoe survey found that 60% of the RIA firms surveyed felt that productivity levels at their firms were not affected by the pandemic—and a quarter cited improving productivity.

That said, for 37% of DeVoe survey respondents, Covid negatively impacted the culture at their firms. 
While the impact came on suddenly, repairing any damage to culture will be a longer-term task, the authors note, stating that firm culture is clearly among the most critical influences on engagement. 

It’s also shifted the spotlight toward succession planning, and DeVoe & Company says it has recently experienced a significant uptick in succession planning engagements. Overall, the implications of COVID created a growing shift for advisors to look inward, and to focus on their people and HR-related issues. Ultimately, greater attention to optimizing human capital will lead to stronger firms and a healthier industry, according to the report.

Succession ‘Plane’

COVID has likely inspired RIA firm owners, like their staff, to also rethink ambitions. The pandemic brought perspective to their own mortality and heightened awareness of the need to get “affairs in order” in the event of the inevitable, the authors note. They go on to suggest that going forward this will serve to further brighten the spotlight on the importance of succession planning and hopefully inspire owners to take action. 

The survey showed that some—though not many—advisors took accelerated action. Seven percent indicated that they accelerated the development of a succession plan. That said, the authors note that the urgent priorities caused by the pandemic also crowded out the initiative; about 8% of surveyed advisors stated that they have delayed their succession planning due to COVID. Just half of DeVoe survey respondents indicated their firms had implemented a succession plan. For another 35%, there was no formal written plan at all. The share without a plan is unchanged from the last DeVoe survey conducted in late 2019.

It’s worth noting that those firms without a plan are not just from small, and typically younger, firms. According to Devoe, they are spread across all firm sizes. For example, they included 16% of responses from firms over $3 billion in AUM.

Generation ‘Gaps’

Not that the pandemic hasn’t highlighted other issues; a solid majority of advisors (61%) report a low degree of confidence that their next gen is capable of a seamless transition. Indeed, readiness has weakened relative to 2019, when 56% of advisors lacked full confidence. “The percentage that lack confidence in next gen and the downward sloping trend should raise an alarm bell across the industry,” the authors note. “The decline in next gen readiness is likely driven by founders taking a harder look at their successors in light of the pandemic and concluding that there is more work to be done.”

On the other hand, over half of the firms with succession plans (51%) felt their next generation was ready for a seamless transition, compared to just 16% for those responses representing firms without plans. For those firms that have a formal written succession plan in place, the clear commonality was good people practices, according to the report, which goes on to explain that, by wide margins, these succession-prepared firms were more apt to have the following practices in place:

  • Structured approach toward timing hires          
  • Clear methodical structure for advisor incentive compensation  
  • Regular conduct of team member performance reviews
  • Clearly articulated career paths
  • Intentions to expand remote work opportunities long term
  • Increased level of leadership communications due to the pandemic

Compensation Plans

The most common pitfall for sub-optimal compensation plans according to the report is linking compensation to a percentage of revenue. “The structure incents ‘hoarding’ of clients, is insensitive to client attrition, and is an ineffective way to drive new client growth,” according to the report. The authors state that a well-structured plan will not only ensure that the right long-term behaviors and results are being rewarded, but that the targets and goals driving incentives are rooted in the company’s purpose, vision and values. That said, they also remind the reader that “redesigning an incentive compensation plan is much more than a week-long project…”

The report notes that in some instances—especially in terms of adoption of new technologies, pandemic-induced productivity improvements may be lasting, including things such as enhanced video-conferencing capabilities, which made meetings more efficient and reduced travel demands. On the other hand, the report opines that as society opens, and workers again commute to the office, they are less likely to devote as much time to work.

All in all, the report notes that RIA leadership teams should not take the shift back to “normalcy” lightly. “Understanding the evolving needs of staff is an important tactic to better anticipate and mitigate attrition. The lives of many workers were profoundly affected by an abrupt shift to remote work. Returning to the office may prompt an open-arms welcome from employees—or be the reason that they leave the firm.”

The survey was conducted between February and May among 123 representatives of RIA firms. Respondents were senior executives, principals or owners of firms with $100 million or more in assets under management.