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.”
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.