As a firm’s most important asset, a key objective of workplace benefit plans generally and retirement plans specifically is attracting and retaining quality talent and creating a cycle of opportunity. A new study offers a comprehensive look at compensation practices in the independent financial advice industry.
Charles Schwab’s newly released 2018 RIA Compensation Report finds that nearly three quarters (73%) of firms plan to hire staff in the next 12 months and 41% of firms in 2017 recruited employees from other RIAs to fill open positions.Schwab’s report reflects responses from the firm’s annual RIA Benchmarking Study.
Typically the largest share, staffing and compensation accounted for approximately 73% of a firm’s annual expenses, the study notes. Base salaries for client account management, sales and marketing roles ranged from $55,000 to $135,000 at the median, while total cash compensation ranged from $60,000 to $193,000 at the median. Total cash compensation – including owner profit distributions – ranged from $60,000 to $217,000 at the median.
Perhaps not surprisingly, more client service associates (77%) receive performance-based incentive pay compared with other roles. Performance-based pay is defined to include compensation resulting from firm goals, department or team goals and business development results.
In addition, 27% of senior client account mangers/relationship mangers have compensation tied to revenue, while 47% have some degree of firm ownership – more than any other role, Schwab notes.
As for investment positions, base salaries ranged from $57,000 to $125,000 at the median. Total cash compensation ranged from $62,000 to $154,000 at the median, while total cash compensation – including owner profit distributions – ranged from $62,000 to $166,000.
And compared to client-service staff, more investment staff receive performance-based incentive pay. According to the study, 80% of traders collect performance-based incentive pay. This was also the case for 78% of portfolio administrators, 77% of paraplanners, 74% of research analysts, 71% of financial planners and 58% of investment/portfolio managers.
Concerning firm ownership, 37% of investment/portfolio managers and 12% of financial planners have some degree of it. A quarter (25%) of financial planners own half or more of their firms, while nearly a quarter (22%) of investment/portfolio managers own half or more.
While operations and administrations staff are less likely to receive firm equity, the report notes that 12% of operations directors/managers and human resource professionals own a portion of their firm.
In this year’s study, 909 firms participated in the compensation portion, representing nearly three-quarters of those who participated in the overall RIA Benchmarking Study (1,261 firms) fielded from January to March 2018. The compensation portion includes data on 10,266 employees across 27 roles typically found at RIA firms.