Retaining Talent Is Becoming Top Priority For Large RIAs, Schwab Says – Financial Advisor Magazine

Recruiting and retaining talented staff is becoming increasingly import for financial advisory firms, according to the Charles Schwab 2021 RIA Benchmarking Study for firms with more than $1 billion in assets under management.

While adding clients through referrals remained the top priority for large firms, recruiting staff to increase the firm’s skill set and capacity moved up from 5th place a year ago to second place in 2021, the study said. Top performing firms, those that rank in the top 20% of the Schwab Firm Performance Index, which evaluates firms according to 15 metrics, have certain traits in common.

For instance, three fourths of top performing firms have written strategic and written succession plans, according to the 2021 RIA Benchmarking Study of 1,340 firms of all sizes that custody their assets with Schwab or TD Ameritrade. Reports on firms of other sizes are being released separately. The successful firms also have clear career paths for employees.

“Cultivating and rewarding the next generation of leaders is critical to driving firm success and retaining top talent,” Lisa Salvi, managing director, business consulting and education at Schwab, said in an email response to questions. “Many large firms that serve high-net-worth clients build long-term commitment by establishing clear career paths for employees. The study found that 87% of firms with more than $1 billion in AUM have staff in at least 2 of the 3 following roles: client service associate, client account manager or relationship manager, and senior client account manager or relationship manager.

“By providing ample opportunities for professional development and internal mobility across client service positions, larger firms can support the growth of their employees’ client service careers,” Salvi continued. “In turn, this creates a cycle of opportunity by increasing employee satisfaction and unlocking potential, resulting in strong employee retention and ensuring continuity of firm culture and values.”

Firms that invest in the staff, through such things as training, education and paying professional dues, “help team members feel connected and appreciated, which is especially important during uncertain times,” Schwab said.

Acquiring clients also is important to large firms, and top performing firms have strategies in common. These firms prioritize client acquisition, with digital channels increasing in importance. More than half of these firms optimize their websites for lead generation through search engine optimization and content designed for their ideal client persona and use website metrics and analytics to track the effectiveness of their websites to attract and engage prospects, the study showed. Referrals account for a majority of new clients, yet fewer than half of the firms said they have documented referral plans.

Schwab called the revenue growth rate of firms of all sizes over the past five years “solid.” Firms with $1 billion to $2.5 billion in AUM, recorded an annual revenue growth rate of 7.9%, while those firms with more than $2.5 billion in AUM recorded a 7.1% annual increase in revenues, which is in the same range as that of smaller firms.

M&As probably will continue to surge as 39% of firms with $1 billion to $2.5 billion in AUM said they are actively seeking to buy other firms, and 27% of those with more than $2.5 billion in AUM said the same.

Top performing firms are more likely to have thought about the parameters of their business success ahead of time and put it down on paper. Top performing firms have a documented ideal client personas and documented client value propositions. More than half of top performing firms also have a documented marketing plan and those firms spend more to execute their plans, the study said.