Competition for talent among registered investment advisors (RIAs) remains intense, with Charles Schwab emphasizing three critical areas in the employee value proposition: compensation, benefits, and the firm’s mission, culture, and values.
For most advisors, compensation is the cornerstone of this equation. From 2019 to 2023, median cash compensation for advisors rose 17%, according to Schwab’s 2024 RIA compensation report. This growth significantly outpaced the earnings trends for the average U.S. worker, where median annual earnings for men dropped by 1.7% and women experienced a 1.2% decline during the same period, as reported by the U.S. Census Bureau.
Base salary forms the foundation of an advisor’s cash compensation package, accounting for 79% of total cash pay. Performance-based incentive pay represents 10%, owner profit distributions make up 7%, and revenue-linked compensation contributes 4%. Notably, 77% of RIAs surveyed by Schwab in 2023 offered performance-based incentives, underscoring the importance of merit-driven rewards in retaining top talent.
As the largest custodian to independent RIAs in the U.S., Schwab plays a pivotal role in safeguarding client assets while providing research and insights crucial to the advisory sector. One significant trend identified is the increasing use of equity stakes as a recruitment and retention tool. Equity ownership not only aligns advisors' incentives with those of the firm but also enhances long-term commitment. At the median firm surveyed, one in three employees holds equity, and among firms managing $5 billion or more in assets, two-thirds provided equity stakes to advisors bringing a book of business in 2023.
Schwab advises founders considering succession or growth strategies to expand equity opportunities among their teams. Doing so fosters a culture of ownership and contributes to firm value and sustained growth. “Founders who wish to maximize the financial rewards of their enterprise value should proactively include additional equity owners rather than delaying this process,” Schwab’s report suggests.
Beyond compensation, benefits play a vital role in attracting and retaining top-tier talent. While traditional benefits such as health insurance are deemed essential, firms are increasingly adopting innovative perks to stand out. Hybrid or remote work options are offered by 75% of the firms surveyed, and 70% provide flexible work schedules. Nontraditional benefits are gaining traction, with 63% of firms offering financial planning services for employees and 36% granting paid time off for community service or volunteer activities.
A firm’s culture, often encapsulated in its mission statement, is another key component of the employee value proposition. Schwab emphasizes the importance of articulating and communicating a firm’s mission, culture, and values to attract advisors whose personal goals align with the firm’s ethos. Among high-performing firms, 86% actively promote their mission and values in recruitment efforts, leading to lower turnover rates compared to their peers.
“This year’s compensation report highlights what we’ve long recognized: Talent is a firm’s most critical asset, and this trend is only gaining momentum,” says Lisa Salvi, managing director of business consulting and education at Charles Schwab Advisor Services. “By refining their employee value propositions and incorporating performance-based incentives and equity opportunities, RIA leaders are focused on attracting, inspiring, and retaining the brightest minds in the industry.”
RIAs are increasingly leveraging a multifaceted approach to recruitment and retention, prioritizing financial rewards, fostering a culture of ownership, and embracing innovative benefits. These strategies ensure that firms not only attract top talent but also create environments where advisors feel valued, aligned, and motivated to contribute to long-term success. As the competition for talent intensifies, firms that adapt and innovate in these areas are best positioned to thrive.
