RIAs Face Talent Crunch, Schwab Reports

As registered investment advisers navigate a period of rapid growth and heightened competition for talent, the emphasis on recruitment strategies and employee-centric policies will shape the industry’s ability to meet its ambitious hiring goals, according to Charles Schwab’s “2024 RIA Compensation Report,” an addendum to its “RIA Benchmarking Study 2024” released earlier this year.

In its survey of more than 1,000 RIA firms, Schwab found that recruitment teams are casting a wide net to attract talent from diverse sources to meet employment demand.

Personal and professional networks are still the most dominant channel for RIAs, but colleges and universities are also being utilized as a key source, as are competitor firms.

Recruitment has emerged as a key strategic priority for RIAs, ranking third among industry concerns. In 2023, the median firm added two new positions, with each new role typically linked to every $370,000 in revenue growth.

Over the past five years, about three-quarters of RIA firms have consistently hired staff annually. For 2024 that was similar, with 73% of firms reporting plans to expand their workforce.

Over the next five years, the study stated that the industry will need to hire more than 70,000 new staff to sustain current growth rates. This projection excludes the impact of attrition, retirements or new firm formations. Median firms anticipate adding four new roles, while top-performing firms expect to add seven.

Staff Composition

RIA firms had a generationally diverse workforce in terms of age groups, with 46% of employees younger than 40, 22% aged 40 to 49, and 32% aged at least 50.

While firms reported relatively strong gender diversity, women are still not in many higher-ranking positions: Women accounted for 46% of all employees but were less represented in advisory (29%) and executive management (23%) roles.

Client account and relationship managers made up 20% of the workforce. For every revenue-generating role, there were 1.3 support roles focused on non-revenue tasks. Executive management positions accounted for one in six staff members. As firms have expanded, they reported an increase in incorporating dedicated client service teams, specialized roles and executive leadership positions.

Employee Value Proposition

A strong employee value proposition is key to attracting, motivating and retaining talent, Schwab stated, based on data collected by the survey.

Top-performing firms are more likely to have a documented EVP that outlines what the firm offers employees in exchange for their skills and expertise. These EVPs often emphasize compensation, benefits, mission, culture and values.

Meanwhile, total cash compensation for the median employee across 27 roles has risen 17% from 2019 to 2023. Base salaries comprised 79% of total cash compensation, with incentive pay and equity offerings aligning employee performance with firm success.

While traditional benefits like health insurance remain essential, nontraditional perks are becoming a differentiator. Remote or hybrid work arrangements are offered by 75% of firms, and 70% provide flexible schedules. Notably, 68% of top-performing firms include unique benefits as part of their total rewards packages.

Conducted between January and March, the study is based on self-reported data from 1,304 firms that custody assets with Schwab, collectively representing $2 trillion in assets under management.