RIAs are flush, and odds are that revenue and AUM are up at your advisory firm. So, have you gotten a raise yet?
Many of your counterparts around the country have, along with lots of perks intended to keep them happy at their firms.
Over 90% of RIAs participating in the 2017 compensation study by Fidelity Clearing & Custody Solutions reported giving salary increases as well as bonuses last year. One-third said raises ranged from 2% to 4%, while half reported increases of 4% to 10% or more.
“The labor market for advisory talent has definitely tightened,” says Michael Nathanson, CEO of Colony Group, the $10 billion Boston-based RIA.
Even as RIAs face an aging advisory force and not enough next-generation replacements, those challenges are compounded by a strong labor market and the likelihood that the dissolving Broker Protocol will diminish the pool of breakaway brokers, further reducing the supply of available talent to meet the voracious demand of fast-growing RIAs.
What’s more, advisory firms are finding it harder than ever to attract already elusive college graduates, says Rich Busillo, CEO of RTD Financial Advisors in Philadelphia. “It’s not just more competitive for existing advisors,” he says. “There’s also more competition for new college grads because of the strong job market in a number of industries.”
More than two-thirds of RIAs with more than $250 million in AUM made talent acquisition a priority last year, as did nearly all firms with $1 billion or more in AUM, according to Charles Schwab’s 2017 RIA Benchmarking Study. Few expect the trend to diminish anytime soon.
As a result, compensation is on the upswing. At Colony Group, salary increases averaged 3% to 5% last year, Nathanson says. RTD Financial Advisors’ pay increases ranged between 2% and 6%. Salaries for entry-level advisors start at $50,000 to $60,000, Busillo says.
Base salary increases at Atlanta-based Homrich Berg Wealth Management averaged 3% last year, but a number of employees had their paychecks rise 6% to 10%, says Paul Ribes, the RIA’s chief operating officer. Base salaries for college graduates at the firm are around $50,000, he adds.
Across the country, in Long Beach, California, advisors starting at Halbert Hargrove can make $80,000, according to Cecilia Williams, the firm’s chief compliance officer.
Such regional differences are not uncommon. Median total compensation for lead advisors in San Francisco is $193,000, according to Fidelity’s research, while lead advisors in Dallas make $175,000. The spread is less for positions further removed from clients. Operations managers in San Francisco can expect to receive $102,000, but total compensation for the same job in Chicago isn’t far behind at $94,000, the Fidelity report shows.
Regional Pay Differences
Nationally, industry compensation studies are hardly uniform.
Fidelity reports that the median total cash compensation for relationship managers in 2016 was $120,000, while Schwab’s Benchmarking Study for the same position in the same year was nearly $30,000 less.
Similarly, FA Insight reports that business development specialists received $180,500 in median total compensation in 2016, while Fidelity’s data has that group receiving $163,000 in total direct compensation.
But there’s no doubt that CEOs are by far the top earners, followed (not closely) by chief investment officers. The median total direct compensation for the CEO/president position is $630,000, according to Fidelity, while CIOs receive $375,000.
As for the front lines of financial advisory firms, the median total direct compensation for office managers for all firms was $110,200 in 2016, according to Fidelity, while office managers in firms with more than $5 billion in AUM received $123,200.
But money is only one part of the compensation picture.
“It’s really about the employer value proposition,” says Vanessa Oligino, director of business performance solutions for TD Ameritrade. “When talking with potential employees, the conversation should not be about the dollar amount, but addressing their questions like: ‘Do I want to be here every day?’ and ‘How can I contribute?’ and ‘Will I be recognized?’ ”
Fidelity’s vice president of practice management and consulting, Anand Sekhar, agrees. “Salary and bonuses are table stakes now,” Sekhar says. “People want to be inspired. They want to feel empowered and energized when they go to work.”
Firms are increasingly doing that by offering what Sekhar calls “creative benefits.” RTD Financial, for example, has a so-called fun committee. The committee has its own budget and meets quarterly to plan events such as a pre-Super Bowl potluck party, an ice skating night out and outdoor happy hours, where employees can socialize and relax.
The committee also plans RTD’s annual midyear meeting, which combines business seminars with after-hours activities such as go-kart racing, as well as social-responsibility events such as a 5-kilometer run to benefit the American Stroke Foundation.
“We realized that we’re with each other almost as much, if not more, than we’re with our families,” Busillo says. “So we want to make sure we have fun while we’re doing great work.”
Being able to make decisions without prior approval from the firm’s board of directors has been critical to the committee’s success, says Rachel Moran, an RTD advisor and director of the fun committee.
“We have a budget for each year, which gives us the flexibility to plan events on the committee level without prior approval,” Moran says. “This aids in efficiency but also in ownership — employees feel empowered to suggest ideas and follow through with their planning and execution.”
Homrich Berg also has a “fun workplace” committee to arrange off-site get-togethers, monthly happy hours, and lunch and learn sessions, where employees are treated to a meal while an expert explains various aspects of the advisory business. “Everyone is involved,” says Ribes, the COO. “We want people to enjoy being here.”
Unlimited Vacation Time
Another trend that’s gaining traction: generous vacation time. Colony wants to be “the leading financial advisory company in the country for clients and employees seeking meaning and joy in their lives,” Nathanson says.
Accordingly, the firm allows principals and key senior employees — about one-third of the workforce — to take unlimited vacation time (within reason) if they need it.
“If one year, an employee has to take six or seven weeks off, they can go ahead, as long as they behave responsibly and get their work done,” Nathanson explains. “It’s a matter of who is in control, and we want the employee to feel they are in control of their life.”
And if you were wondering — yes, it’s a paid vacation. Nathanson says the firm doesn’t track how many employees have taken advantage of the benefit, but he expects most will at some point. “We have not had any problems with this approach,” he says. “We expect them to get their work done, and as long as they do, everyone is happy.”
At Halbert Hargrove, vacations are seen as “a huge part of the work-life balance, which we want to be as flexible as possible,” Williams says.
Employees can take “as much time off as they need, as long as it’s responsible and they can get the same amount of work done,” Williams says. Not surprisingly, the policy has gotten “a great response,” she says, with workers being “very appreciative.”
Homrich Berg’s vacation policy is more formal, but also generous. Workers get an extra week off after every five years of employment, as well as a bonus check worth four weeks of pay.
Commuters and Caregivers
As a long commute is a pain point for many employees, some firms, including Halbert Hargrove, are incentivizing employees to cut their commutes. The firm offers a relocation incentive of $500 per month if employees move to an area within a 20-minute drive to work, Williams says.
“A long commute can wear on you, especially in Southern California traffic,” she says. “Living closer to the office makes everything a lot easier.”
Halbert Hargrove’s family leave policy also makes life easier for new mothers, says Williams, who is pregnant with her first child.
Under California state law, employees receive 12 weeks of paid leave, but Halbert Hargrove has sweetened the pot. Moms and dads of newborns are eligible for a child care reimbursement of $400 a month, provided they submit receipts.
The firm also provides a room where mothers can breastfeed and caregivers can stay with babies when parents return to work. “It’s a very family-friendly policy,” Williams says, “and a huge benefit for new mothers.”
At Colony, returning new mothers and fathers can work part-time for an agreed-on transition period, work from home or, if they prefer, from a nearby Colony office. The firm has secure technology installed in homes to facilitate remote working, and nursing mothers who return to work can request privacy blinds in their offices.
Around the country, RIAs are offering “more progressive family leave policies and support for working parents as they compete for next-gen advisor talent,” says Fidelity’s Sekhar. “I wouldn’t say it’s widespread at this point — those that are offering these kinds of benefits are really at the forefront of this space. But it will help establish them as a talent destination, especially as they seek to attract younger, more diverse advisors.”
Gym Fees, Cool HQs
Colony Group pays 50% of employees’ gym membership — 100% if they go to the gym at least three times a week, reported on an honor system.
The firm also gives extra days off to employees to volunteer for their favorite charity. Employees decide the causes that Colony supports via its donor-advised fund.
Some firms take employee satisfaction into account when they design offices. Homrich Berg’s new headquarters in the Buckhead section of Atlanta, set to open this summer, was configured with employee retention in mind, according to Ribes.
“We saw that people wanted lots of natural light and liked an open concept, where they could get together with their team in their own neighborhood,” Ribes says. “We also made sure to include a Starbucks-like café area where people can both collaborate on work if they want to or just relax and take a break.”
Homrich and a growing number of innovative firms are clearly taking the advice of Fidelity’s Sekhar to heart.
“Firms today have to address how they can most effectively drive and engage their workforce,” he says. “They have many options, but they can’t be static.”