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Here’s How Much RIA Employees Get Paid, According to Schwab

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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.

The majority of staff in client-account management, sales and marketing roles received performance-based incentive pay. Nearly a quarter (24%) of senior client-account managers and relationship managers had compensation tied to revenue, and close to half (49%) had some level of ownership in the firm, more than any other non-executive management role.

Base salaries for investment roles at RIA firms, meanwhile, ranged from $60,000 to $125,000 at the median, Schwab’s study finds. Total cash compensation ranged from $65,000 to $160,000 at the median, while total cash compensation including owner profit distributions ranged from $65,000 to $170,000.

More than 55% of all investment roles received performance-based pay, the report notes. Eighty percent of paraplanners collected performance-based incentive pay, followed by 78% of portfolio administrators, 76% of traders, 73% of research analysts, 72% of financial planners and 55% of investment and portfolio managers.

Almost one-third (31%) of investment and portfolio managers and 13% of financial planners had some degree of firm ownership. In comparison, more than a quarter (26%) of financial planners had 50% or more ownership in their firms, while 17% of investment and portfolio managers had 50% or more ownership.

Also, more RIA firms are adding client teams and specialized roles to support strategic firm growth and deliver exceptional client experiences, the study finds.

Best Practices for Compensation

When it comes to compensation, RIA firms should follow the following best practices, according to Jerry Cobb, a senior business management consultant at Schwab:

  • Develop a strategic plan; 
  • Create a “compensation philosophy” on how employees at your firm are paid and “what they are paid for;” and 
  • “Don’t guess” — instead, “get your hands on reliable data to create your comp plan.”

Technology is another factor influencing compensation, Cobb said. “Our industry is undergoing a massive technology revolution that we’re only in the beginning stages of, …  and that is generating increases in productivity that are also reflected in the compensation increases” of RIA firms, he said.

A total of 761 firms participated in the compensation portion of the study in 2020, representing three-quarters of those who participated in the overall study (1,010 firms), Schwab said.

Schwab’s poll for the 2021 RIA Benchmarking Study is now open, it said.

(Photo: Bloomberg)