Of these, performance-based incentive pay, which 79% of firms offer, had the greatest effect on firm success, the report found. Firms that offered it saw a 28% increase in AUM, 34% greater net asset flows and 31% more clients over the last five years.
Equity ownership also remained an important part of a compensation package, and Schwab found that a third of total staff at firms with $100 million to $250 million in AUM were “working owners” while just over a quarter of staff at firms with more than $1 billion were.
Benefits
Traditional benefits, such as health and dental insurance, are now table stakes for advisory firms, and nontraditional benefits are what strengthen a firm’s job offer to desired applicants.
According to the report, top performing firms tend to offer remote work (74%), flexible work schedules (73%), investment management and financial planning for employees (69%), health and wellness benefits beyond insurance (61%) and paid time off for volunteering (47%).
Other benefits can also sweeten the relationship with potential hires, including unlimited paid time off, which is offered by nearly 20% of firms (double what it was five years ago); parental leave, which is offered fully paid by 66% of firms; and a robust 401(k) retirement plan option, in which 80% of firms participate, with a median match of 4%.
Career Path/Progression
The better the firm, the more important this is, as 82% of the larger, top-performing firms have defined career progression opportunities, compared with just 48% of smaller firms.
Not only do those top performing firms also offer more of those opportunities, they also invest more money in them, Schwab found.
For example, 80% of top performers offer staff training and skill development, compared with 60% of all other firms. Top performers also have mentoring and coaching for staff (63%) and defined steps to advancement (57%) compared with 45% and 37%, respectively, of all other firms. And those top performing firms spend about $1,730 per year per professional staff on training, education and profession dues, compared with $1,430 for other firms, the report stated.
The compensation report is an addendum to the annual Schwab Benchmarking Study, in which 1,218 advisory firms participated from January to March of this year. Data was collected for 13,500 employees in 27 roles often found at RIAs. For the optional compensation portion of the study, 80%, or 971, of those firm participated.