Want good people to work at your advisory firm? Of course you do. And according to Schwab Advisor Services, the three vital components that help attract and retain top talent are aligning compensation plans with business strategies, incorporating more than just base salary into compensation plans, and creating a path to equity partnership for key employees.
In a press release today from Charles Schwab’s unit that focuses on registered investment advisors, the company said it gleaned its findings from its 2014 RIA Benchmarking Study that incorporated input from nearly 900 advisor firms representing about 8,000 jobs across 21 roles.
Regarding linking pay to business strategy, Schwab says connecting compensation to performance goals helps motivate employees to boost productivity and firm-wide profits. In addition, regular performance evaluations can reinforce goals, track career development and help make sure compensation plans are in sync with a firm’s strategic goals.
In that vein, Schwab says most firms offer some type of compensation beyond base salary. Its data show that base salary comprised 88 percent of total cash compensation last year, and that 91 percent of employees received some type of incentive compensation. Eighty percent of firms offer medical insurance to their employees, while nearly half of advisory firms who participated in Schwab’s benchmarking study said they provide perks such as dental insurance, long-term disability or fully paid maternity/paternity leave.
Schwab notes that creating a path to partnership is crucial to creating a sustainable business model. It found that 32 percent of firms with over $1 billion in assets added new equity owners, while only 8 percent of firms under $250 million in assets added new owners.
Why the disparity, and what that means for the industry, perhaps will be dealt with at a later date.