fa ’ s 2022 ria survey and ranking
“ Anybody who is talking about cutting out services does not actually understand that adding more and more value to the lives of others is the future of our business .”
— AdAm BirenBAum , Chief of Buckingham Strategic Wealth
he says there is less pushback from clients on fees . “ The clients will see the value whether it ’ s investment returns , whether it ’ s tax planning , whether it ’ s dealing with all the issues that take a lot of time , being the interface with their other advisors — their attorney , their accountant — coordinating all of those activities , there ’ s a time value , an assurance value to that that they ’ re looking for .”
Adam Birenbaum , the chief of Buckingham Strategic Wealth , says that the future of the RIA industry is the democratization of the business . “ So anybody who is talking about cutting out services ,” he says , “ does not actually understand that adding more and more value to the lives of others is the future of our business . Those that look at it from a traditional commercial or corporate lens as it relates to high margin business [ don ’ t ] understand that they won ’ t have the clients to extract margins from if they do not continue to maneuver their businesses to be family offices to Main Street .”
Private equity firms may have reputations as asset strippers , but they have become sophisticated investors in the wealth management world . They know RIA firms are service-oriented , relationship businesses . It ’ s not necessarily a leaner , higher profit margin that these investors are looking for . A firm with a 60 % net profit margin could be understaffed , something PE firms know , DeVoe says .
“ If you ’ re trying to improve your margins you drop the business lines ; if you ’ re trying to gain market share you add business lines ,” says Peter Mallouk , the president and CEO of Creative Planning in Overland Park , Kan . “ Now , I think removing business lines is shortsighted . I think that ’ s what the marketplace demands . … I don ’ t think [ firms ] necessarily have to prepare a tax return , but they have to be able to give tax advice .”
Less Turnover
Palaveev says that advisors tend not to turn over in the RIA space quite as often . Until recently , that has kept salaries from rising .
“ When there ’ s more turnover , there ’ s more tendency for prices to reflect the market ,” Palaveev says . “ Markets with low liquidity are not always priced right . In the labor market , liquidity means people changing jobs . I believe that ’ s why we didn ’ t see much increase in compensation to advisors for the past five years or so , even though profitability went up , even though inflation went up … and [ yet ] still salaries were very stagnant . Part of that is that there is no pressure to reprice your talent when your talent is not leaving .”
During the financial crisis , many financial advice firms were privately owned . When faced with revenues severely reduced by the 2008 recession , some focused on cutting back salaries or staff ( or getting rid of the free stuff ).
numBer oF employeeS
category
HoW AdviSorS Found employeeS in lASt 3 yeArS
Referrals From Other Employees
Referrals From Outside Sources
Through College Placement Programs 24.53 %
Internet Advertising 44.38 %
LinkedIn 50.37 %
2021 mean
67.42 %
68.54 %
2020 mean
Executives , partners and managing directors |
9.10 |
7.94 |
Client relationship managers not included above |
11.75 |
10.24 |
Other professionals / specialists not included above |
14.40 |
11.90 |
Client services staff |
10.19 |
8.50 |
Administrative staff |
5.22 |
4.61 |
TOTAL EMPLOYEES |
51.76 |
43.88 |
ACtionS FirmS HAve tAken in tHe lASt 3 yeArS
category actions taken in last 3 years % actions likely in next 12 months %
Hired strategy consultant |
40.45 % |
7.30 % |
Obtained a valuation appraisal |
44.94 % |
9.36 % |
Added one or more offices |
35.39 % |
11.05 % |
Held exploratory merger talks |
41.01 % |
10.11 % |
Rejected a merger proposal |
28.84 % |
3.75 % |
Hired a former registered rep to work at your firm |
33.15 % |
9.93 % |
july / august 2022 | financial advisor magazine | 39