How RIA consolidation and slow organic growth is changing compensation

• Key Insight: Record 39% profit margins are masking a 10-year low in organic growth, triggering an industry shift where advisory firms pay premium cash salaries but restrict access to expensive equity.
• What's at Stake: Founders riding high on current margins without actively hiring junior talent or acquiring new clients risk crippling their firm's valuation in eventual M&A deals.
• Expert Quote: "Ultimately they're going to lose value in their business is really what's going to happen. One of the cautions that buyers are really aware of is firms that are no longer growing." — Jeff Nash, Bridgemark Strategies

A "slow but powerful transformation" of the industry's consolidation is yielding big paychecks for financial advisors but less equity compensation, according to a new study.

The 39% profit margins across more than 170 independent advisory firms in 2025 combined with a 10-year low in organic growth rates, at 3.7%, to create a juxtaposition in the industry's compensation trends, consulting firm The Ensemble Practice found in its annual pay study. Those dynamics reflect "an industry that is paying more and moving less," with a labor market that is slow, "but full of anxious energy," the report said. 

While the group of independent registered investment advisory firms and other advisory practices participating in this study and the firm's other annual tracking survey on profitability likely overrepresents firms that have worked with the consultancy or spoken with it in the past or have outsize financial performance compared to average peers, the research added to other recent studies with similar findings.

For advisors and RIA owners, the slower expansion rates lead to the obvious conclusion that firms must find more ways to attract new clients. In terms of the industry's recruiting and compensation strategies, though, the tumbling growth also shows the inevitable result of "an older advisor base" that is "conservative" about hiring junior talent in a time of healthy profits, according to Jeff Nash, CEO and co-founder of recruiting firm Bridgemark Strategies. A dearth of successors and other talent outside of the founding advisor could, in turn, cost them in the end, if they eventually sell the business to an outside investor.

"Ultimately they're going to lose value in their business is really what's going to happen," Nash said. "One of the cautions that buyers are really aware of is firms that are no longer growing."

READ MORE: Navigating the pitfalls and perks of private-placement life insurance 

Highly valued and rarefied equity compensation

Regardless of the underlying valuation in the flow of deals, M&A consolidation is changing the industry from "an ecosystem of owner-operated firms that offered long-term careers with mutual commitment from both the firm and profession" to a shifting talent market "with increasingly complex compensation dynamics," the report said. So the "profound impact of consolidation" is altering the staffing and pay strategies across the industry. 

"Cash compensation is growing — advisors are now one of the highest-compensated professions in the country," the study said. "Yet equity is becoming less available across all firms, as it has become very expensive in terms of multiples of profit."

Even though the highest-level executives and team members usually control the most equity in any firm, the report said that equity pay "is concentrated" at many advisory practices. At least 78% of the CEOs said they have equity stakes and 53% of senior advisors reported owning them as well, compared to only 14% of advisors one rung below them in the chain of command. The consolidation and slow organic growth, as well as the importance of revenue production to compensation, will dictate how firms respond with their pay plans in coming years.

"In advisor-owned firms, advancement is slower, salaries dominate the compensation method, and equity acts as the driver of meritocracy where long-term contribution reconciles with current results," the study said. "In firms with external ownership, cash compensation is higher, promotions come faster, and advisors change firms more often. Efficient markets do not tolerate arbitrage. How much stability and ownership tradition can continue to offset cash compensation and growth orientation is the question this data leaves open, and the answer will shape both the industry and the profession."

Scroll down the page for five charts on the current levels and structure of RIA compensation. For analysis of The Ensemble Practice's other annual report on RIA business metrics, click here. To view coverage of The Kitces Report's study of financial advisor marketing, follow this link.

Note: All statistics below come from last month's annual RIA pay report by The Ensemble Practice, "True Ensemble Data Insights: 2026 Careers & Compensation Survey Results." The consulting firm and data partner ActiFi polled 173 RIAs and other advisory firms on their businesses between January and April this year.

In tracking the compensation of advisors, the report broke them down into four categories: associate advisor (entry level 1, with alternate titles of paraplanner, analyst, senior analyst, planning associate or wealth advisor associate); service advisor (level 2, with alternate titles of support advisor or, in some cases, a higher tier of associate advisor); advisor (level 3, with alternate titles of lead advisor, financial advisor, investment advisor, wealth manager, financial planner and wealth advisor); and senior advisor (level 4, with alternate titles of partner, managing director and senior wealth advisor). The firm assigned other positions like CEO, chief operating officer, president, director of marketing and portfolio manager to separate categories.

A compensation contradiction — and the possible explanation

While the substantial profits "should be funding fierce competition for talent," they simply aren't doing so, according to the study. The advisory practices "appear to want more confidence that an advisor they add will come with the clients to support that advisor, and the slow growth of 2025 has not given them that confidence." No roles at any of the firms saw more than 3.6% of the employees in those positions leave the firm last year, which enabled advisors and other staff members to reap the benefits.

"Compensation rose at every position, but it rose fastest where firms were buying capacity rather than competing for producers: service advisors, the position that provides leverage to relationship managers, saw the fastest salary and total compensation growth in the report, while CEO and client service associate compensation grew the slowest," the study said. 

READ MORE: RIA buyers think 'market has reached its ceiling': DeVoe

The major industry trends tied to compensation

While the positions of client service associate and associate advisor act as "the major hiring points" for advisory practices, the rate of promotion surpassed that of the appointment of new incoming employees among senior advisors and approximately mirrored it for advisors, the report noted. But the 28% lower revenue per employee last year led to support staffing expanding at a faster clip than advisor headcount, which raised several questions. 

"Can firms keep adding people without restoring productivity?" the study said. "Will the high profitability fuel recruiting wars where firms use their high margins to recruit the best people from competitors? To do so, firms would need to gain more confidence that when they add an advisor, they can also add the clients needed. That confidence does not seem warranted by the slow growth, but perhaps with more capacity will come a faster pace of change."

The compensation challenge facing firms

Since equity "remains concentrated toward the top of the advisory career track," the trend points to the issue of whether that could bring "a sharp increase in cash compensation for advisors" who don't hold any stock in their firms, the study said. "The operating challenge is not simply how much firms pay, but how pay, development and ownership reinforce the roles that retain clients, create capacity and produce growth." 

READ MORE: Why advisors are rethinking entity structures for clients  and themselves

The forces determining compensation

Besides salaries, of course, the "two forces" that largely "determine what an individual earns" at an advisory practice are equity ownership and revenue responsibilities, the report said. 

"Revenue managed is the variable that best correlates with senior advisor compensation, ahead of experience and tenure, and it explains why the upper quartile of advisor pay now exceeds the lower quartile of senior advisor pay — those advisors carry larger books than their title suggests. It explains the compact distribution at the service advisor level as well, where the position rarely carries revenue responsibility and its productivity comes from providing scale to others."

Where advisory practices are investing in higher compensation, and why

The record profit margins and low organic growth rates likely "drove advisory firms to add more support positions in operations and administration than advisors," according to the study. "While the investment in talent continues, it is difficult to tell if the slow growth is creating slow movement of talent, or if the low capacity is resulting in notably slow growth. The high margins should be enabling fierce competition for talent but the appetite for such competition seems low. The movement of people is slow and cautious and so are the compensation increases in terms of both salary and total compensation."

Introductory bullet points created by AI with editorial review.