Registered investment advisors are on a hiring binge with nearly three-quarters looking to hire over the next 12 months, a new Schwab Advisor Services survey found.
Rising asset growth, higher revenue, the lure of the independent channel offering more fee options and adding service breadth is fueling the RIA hiring growth, the survey found.
Average assets per client crossed the $2 million threshold for the first time for firms with more than $250 million in assets under management, according to the 2018 RIA Benchmarking Study conducted in the first three months of 2018.
The survey of 1,261 advisory firms found that over the next year:
- 73 percent of RIAs plan to hire.
- 80 percent of RIAs plan to add a relationship manager or an investment professional.
- 65 percent plan to hire administrative staff.
- 41 percent recruited from other RIA firms in 2017.
Strong investment returns last year and internal growth has positioned RIAs well even in the face of market volatility, said Jonathan Beatty, senior vice president, sales and relationship management, Schwab Advisor Services.
Last year, the Standard & Poor’s 500 Index rose 21 percent, the economy grew and unemployment fell.
Recruiter Phones Ringing and Ringing
Recruiters also report phones ringing off the hook as individual advisors or teams of RIAs seek to break away from their wirehouse or regional broker-dealer and join the independent channel.
Wells Fargo Advisors is the latest wirehouse to lose advisors, reporting a second-quarter net loss of 173 registered representatives, or about 1.2 percent of its entire advisor sales force, according to news reports.
“I am being contacted by quite a few RIA firms wanting to expand and wanting to add new advisors to their companies,” said Shawn Smith, founder and principal of Financial Advisor Placement Services in Ipswich, Mass.
“I get calls from RIAs looking to grow every day,” said Jodie Papike, president of Cross-Search Broker & Executive Placement in Encinitas, Calif.
Compound annual growth of assets under management (AUM) and revenue have grown over the five-year period from 2013 to 2017 for RIAs of all sizes, the survey found.
RIAs with between $100 million and $250 million in AUM, and with between $1 billion and $2.5 billion in AUM have grown the most.
Compound annual growth rates for each was 11.6 percent over the five-year period, the Schwab survey found.
Look Before You Jump
The hiring binge may tempt reps to leave their firms for the independent channel, but recruiters caution that advisors should look before they jump.
Compliance demands, technology infrastructures and hiring of specialty personnel don’t make RIAs cost effective before reaching the $50 million or even $100 million in AUM mark at the very least, recruiters said.
“At $100 million it begins to make sense,’ Papike said. “You need a lot of infrastructure and resource to set up on your own.”
She counsels smaller advisors to “tuck” into another RIA to cut back office expenses until an individual advisor’s book grows large enough to make it worthwhile to go it alone.
Advisors who charge a 1 percent fee on $100 million of AUM bring home $1 million, from which costs like compliance, technology, office rent and salaries need to be subtracted.
“You can't really manage money and do all the compliance duties yourself as you'll be spread too thin, so you have to hire,” Smith said.
RIAs are approaching advice and financial planning more holistically and requiring firms to add expertise in the areas of tax and estate planning and income and annuity products.
The survey found that last year compared to 2013:
- 80 percent of RIAs offered charitable planning services last year, up from 63 percent.
- 72 percent offered education planning last year compared to 56 percent.
- 76 percent offered tax planning compared to 69 percent.
- 33 percent offered lifestyle management services compared to 26 percent.
- 31 percent offered life insurance products compared to 24 percent.
- 31 percent offered annuity products compared to 26 percent.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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