RIA comp cover slide copy.png

Getting it right

Compensation is the single largest expense for an advisory firm. Yet, they can't skimp on this critical business need. How firms determine and distribute compensation is critical for meeting the demands of the increasingly competitive industry.

Please click through the images above to see how you stack up against your competition in breaking out people-related expenses, and devising compensation structures.
FP.11152016.RIA slide 2compensation revuenue firm profit overhead.png

Where it goes

Nearly half of revenue for the industry's best managed firms goes to professional compensation.

"As RIAs grow and add more employees, it's crucial for owners to refine their approach to reinforce the desired behavior in their employees," says John Furey, principal and founder of Phoenix-based Advisor Growth Strategies.
FP.11152016. Slide 3 RIA compensation revenue people-related expenses.png

Cash is king

Cash compensation as a share of revenue for advisory firms has declined only slightly over the past five years, from 51% in 2011 to 48% in 2015, according to FA Insight, a division of TD Ameritrade. Other people-related expenses, such as retirement and insurance benefits, have held steady at 7%.
FP.11152015. Slide 4 RIA compensation revenue role compensation.png

Steady payment

Compensation for revenue generators, including lead and associate advisers and business development specialists, dominate firm expenses. After climbing nearly 20% in 2013, cash compensation for these employees has remained largely unchanged at around $236,000.
FP.11152016. Slide 5 RIA compensation non-revenue role.png

Rise in non-revenue pay

Average compensation for non-revenue roles, such as client service representative, operations manager and administrative assistant, has risen steadily over the past five years.
fee revenue Slide 6 RIA compensation revenue structure.png

Salary/commission vs. incentive comp

Despite increased attention being focused on performance-based incentive payments and discretionary bonuses, traditional salary or commission compensation remains dominant.
FP 11152016 slide 7 RIA compensation adviser comp career path.png

How Wescott determines compensation

Here's how Wescott Financial Advisory Group, a $2.3 billion RIA in Philadelphia, structures compensation. A CFP credential is required for all senior positions.

"We want to make sure compensation for each position in the firm is carefully aligned with experience and responsibilities," says Grant Rawdin, the firm's founder and CEO.
RIA compensation how advisers are compensated copy.png

How Bronfman sets compensation

Neal Simon, CEO of Bronfman E.F. Rothschild, a $2.5 billion RIA with 75 employees, is considered an industry innovator when it comes to structuring compensation.

Simon believes in granting key operational staff, such as directors of investment operations and technology, equity compensation for their contributions.

"We want to align the incentives of our senior staff and key contributors with the success of the firm, and equity compensation is a great way to accomplish that goal," he says.
MORE FROM FINANCIAL PLANNING