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February 25, 2021 at 03:07 PM
What You Need to Know
- RIAs' compensation costs are rising as their growth booms.
- Competition for talent is heating up, as the majority of firms (75%) have been hiring, Schwab says.
- A growing number of RIA firms are adding client teams and specialized roles to support their growth.
The median RIA firm recently had about $458 million in assets and eight employees — more than double the asset level of $221 million in 2014, when the median RIA had five employees, according to Charles Schwab.
“That’s a very big change for the culture of a small business,” Lisa Salvi, vice president of Business Consulting & Education at Schwab, said Thursday during a virtual online panel highlighting the findings of the firm’s latest RIA Compensation Report.
Projecting five years out, Schwab expects the median RIA firm to have $705 million in assets and 10 staff members, assuming the same 9% compound annual median growth rate.
Of course, this growth entails higher spending. Compensation costs for RIAs with over $250 million in assets represented about 74% of expenses in 2019, up from 72% in 2018, Schwab says.
The new report, a companion to Schwab’s 2020 Benchmarking Study, also found that competition for talent is growing — as 75% of firms hired staff in 2019 and 39% of firms recruited employees from other RIAs.
Nearly 80% of RIA firms participating in the study did so after the COVID-19 pandemic started. Therefore, while the survey they responded to was focused on 2019, the pandemic could have impacted respondents’ answers to questions about the future, Salvi noted.
How Much Do RIA Employees Get Paid?
Over three-quarters (77%) of RIA firms compensated staff with performance-based incentive pay in 2019, the report states. Median total cash compensation across all roles increased 4% from 2018 to 2019.
Base salaries for client account management, sales and marketing roles at RIA firms ranged from $60,000 to $150,000 at the median.
Total cash compensation, meanwhile, ranged from $64,000 to $204,000. This range was $64,000 to $240,000 when owner profit distributions were included.
