The North American wealth management sector is suffering from a dearth of talent, and a new report from Schwab Advisor Services shines a light on developments. This article considers how the shortage can be addressed, including compensation.

When it comes to RIA talent, demand is outstripping supply.

Advisory and wealth management firms are hiring more, paying more and offering more benefits – and equity.

Total cash compensation has increased 17 per cent from 2019 to 2023 at the median advisory firm and three-quarters of firms are actively hiring, according to Schwab Advisor Services 2024 RIA Benchmarking Study and Compensation Report.

“Competition for talent has never been fiercer,” said executive recruiter Louis Diamond, president of Diamond Consultants. “It’s a great time to be an RIA employee, especially one with specialized skills and a track record of serving clients.”

Offering equity stakes in RIAs has become essential for attracting and retaining top talent in a cutthroat competitive environment. At the median firms in Schwab’s survey of over 1,000 firms, one in three staff members are equity owners, while two-thirds of firms with $5 billion or more in assets under management offered equity to advisors that joined with a book of business.

“Founders who wish to reap the full financial benefits of the enterprise value they’ve built do well to begin including additional equity owners proactively rather than waiting until later in their businesses’ life cycle,” the report stated.

Bennies as bargaining chips
Benefits, of course, are a key part of any compensations package, and traditional benefits such as health insurance, 401k plans and fully-paid parental leave are now table stakes.

Nontraditional benefits such as remote/hybrid work options, flexible work schedules, unlimited paid time off and health and wellness perks, like gym memberships, have emerged as differentiating bargaining chips in the hot job market. 

Working from home or a hybrid remote positions are the most desirable non-cash benefits that Diamond sees job seekers looking for. Firms that want to increase diversity and attract female talent should keep in mind that options such as fully remote working or working from home a few days a week have become so popular that they are now “gating criteria” for many prospective employees, according to Diamond.

Do you have an EVP?
Top performing RIAs are more likely to have a documented “employee value proposition” that serves as the firm’s “talent brand in the marketplace and showcases elements that appeal to both the head and the heart that resonate with the firm’s ideal employee,” the report stated.

Key elements of the proposition should include a compelling work setting; emphasis on teamwork, recognition, and connections; a mission statement defining the firm’s culture; and values and career path and progression opportunities.

Employee value propositions, or EVPs, are catching on, Diamond said.

“We encourage every firm who is seeking to recruit advisors or hire new talent to have a crystal clear employee-facing value proposition,” he explained. “Similar to the value prop for clients, a firm needs to be direct and specific in terms of why their firm’s culture, capabilities and areas of specialty are different from the competition. 

“Given the intense competition firms face for quality talent, if a firm doesn’t invest the time in buttoning up their story and paint the picture of how life will be better relative to the prior firm, that employee will go elsewhere. Competitive compensation is table stakes, so firms must figure out how to connect the dots on other key areas in a succinct and compelling manner.” 

Pipeline and prospects
The hiring frenzy shows no signs of slowing down. Three-quarters of surveyed firms said they plan to keep adding staff, generally adding a new role for every $370,000 in revenue, focusing on dedicated client service teams, specialized operational and investment roles, and executive management positions as they grow.

Where is the talent coming from?  

Just over half the surveyed firms said they recruit from personal or professional networks, 36 per cent are recruiting new talent from colleges and universities, and one-third are targeting experienced advisors at other RIAs. Talent is also being poached from non-financial professional services firms â€“ banks and trusts, wirehouses and IBDs.

To recruit successfully, firms must offer a comp package that at least matches prior compensation, Diamond said. For servicing advisor roles, specialist roles, and executive positions, “equity grants or a defined path to partnership are critical. Another area is a bonus structure that is metric driven rather than subjective. Folks are looking for upside, but it has to be crystal clear and not amorphous.”