Average CEO Pay at Big RIAs Nears $800K: Fidelity
If you’re trying to break away or simply want to see what the big boys are doing on The Street in terms of compensating key employees, then Fidelity has some salary benchmarking figures that might be of interest.
In a new research report, the asset manager and custodian surveyed large RIAs and multi-family offices to see what they’re paying in 20 different job categories.
Participants were handpicked by Fidelity and required to have at least $1 billion in assets under management. Compensation ranges from CEOs getting on average $458,900 in base pay — $797,300 with cash and other bonuses included — to $285,200 for a typical big company chief investment officer ($469,600 total).
“From the study groups we participate in and other large wealth managers we talk to on a regular basis, these numbers seem within range — they’re certainly representative of this industry’s growth and efforts to find and retain good talent,” says Mark Balasa, chief investment officer at Balasa Dinverno Foltz, which manages $3.8 billion.
The bulk of the report is its breakdown of different job salaries for all firms deemed “large” in terms of size as well as assets under management. CEOs and chief investment officers earn the highest overall cash compensation, Fidelity says, with a “significant” portion (33% to 37%) coming through various other incentives.
By contrast, chief financial officers have "a significantly lower portion of their compensation based on incentives,” the survey adds. Base pay for a typical CFO is listed at $243,100 with total compensation topping $328,000.
At the low end, Fidelity reports that receptionists earn on average $49,100 in total compensation at larger firms. But executive assistants typically receive $68,600 while office managers make $116,100 a year.
Other tiered compensation plan averages include: trader ($85,500), portfolio analyst ($90,800), senior analyst ($190,100), portfolio manager ($180,900), senior portfolio manager ($366,400), client services ($66,900), senior relationship manager ($300,900) and head of business development ($447,600).
“Everyone is constantly searching for good talent — no matter what size a firm might be, if you don’t have a well-developed and well-executed compensation plan you’re going to fall behind the curve,” says Balasa, whose indie RIA is based in suburban Chicago.
The report is chock full of complementary tidbits, including results showing that 92% of all large firms boosted salaries across the board in 2017. Almost half were doling out increases that outpaced the national average for their respective positions, according to Fidelity.
But such generic averages probably don’t tell the whole story, notes Steven Foldes, vice-chairman of Evensky & Katz/Foldes Financial Wealth Management in Coral Gables, Fla. At his firm, which manages $1.7 billion, an internal compensation model has been developed for each position.
Such a matrix begins by rewarding key employees and their staff based on the firm’s overall profitability and revenue growth. “These are more objective measures that we’ve developed to make sure everyone at our firm is fully incentivized to do their best work on behalf of our clients,” Foldes says.
Another set of more subjective inputs is also being implemented, he adds. Those rely largely on reviews by supervisors as well as a defined analysis process for individual performance by employees over varying time periods.
“We also believe that keeping up with several of the major benchmarking studies that come out each year in wealth management is another subjective way to make sure our compensation policies are staying ahead of the competition,” Foldes says.
As might be expected, Fidelity finds that large industry employers who don’t match their employees’ 401(k) contributions are very much in the minority. Still, such a group represents almost a quarter of all large RIAs and MFOs. That’s big enough, say the study’s authors, to create a distinct “disadvantage” for major players who either aren’t keeping up with competitive matches or not offering them at all.
The 2017 benchmarking study also points out that use of some sort of formalized employment agreement is generally considered a best practice. But Fidelity’s report finds that only half of large U.S. indie RIAs and MFOs have employment agreements in place for key executives.
“As RIAs grow, creating a set of well-defined and formalized employment arrangements has to be a priority,” says Patrick Goshtigian, president of EP Wealth Advisors in Torrance, Calif., which manages more than $3 billion. As for 401(k) matches, he adds, “some sort of employer contribution is a no-brainer” in today’s advisory marketplace.
Pay ranges are divvied up in rather black-and-white ranges, Goshtigian observes. “Although this study is a good indicator of broad industry averages, many people can wear different hats and play different roles,” he says.
Within each defined duty or job assignment, however, Goshtigian believes such benchmarking efforts can prove useful. “This is very helpful for us on an operational level to help define proper pay and incentive trends on a position-by-position basis,” he says. “We can take this information and parse these industry compensation trends across different roles and different employees’ responsibilities within our own organization.”