4 ways to retain key employees
These programs and practices can help keep talented staff committed to your firm for the long term.
30% of RIA firms that hired new staff last year lured employees away from their competitors.
Retaining your top talent is critical to preserving the client experience and your firm's stability.
Focusing on professional development, competitive compensation, and an inclusive culture can keep your staff engaged and happy.
Competition for talent is fierce in the RIA world, which makes it especially important to focus on retaining your key employees. In 2020, 30% of RIA firms that hired new staff said they had recruited from other firms, according to Schwab's 2021 RIA Benchmarking Study. The takeaway for RIAs: Your competition may have their eyes on your top talent.
Staff turnover isn't just disruptive for your firm and the client experience; it's also expensive. Replacing an employee can cost one-half to two times as much as that employee's annual salary.
What does it take to retain talent? Financial advisors shouldn't be surprised that it takes a well-thought-out plan and continuous, targeted investments. This means both financial and dedicated investments of time and training. Here are four ways to keep your team engaged, happy, and more likely to stay with your firm.
1. Focus on professional development
Helping employees continue their personal and professional growth creates a strong company culture. You can foster this culture by investing in talent development, such as paying for specialized training, continuing education, or industry certifications.
Maintaining this commitment is especially important in uncertain times. For example, even amid the pandemic disruptions of 2020, RIA firms with AUM under $250 million spent a median $1,250 per professional on training, education, and professional dues. Meanwhile, firms with more than $250 million in AUM spent a median of $1,717 per professional, according to the 2021 RIA Benchmarking Study.
Beyond external training opportunities, RIA firms should also consider in-house professional development strategies, such as one-on-one mentorship programs that match junior employees with senior members of the team. Other one-on-one professional development strategies include advocacy, an informal relationship in which one employee—a peer, a subordinate, or a senior—monitors another's developing skills and performance and speaks on their behalf for potential career opportunities. Sponsorship takes this relationship further by pairing high-talent staff members with a senior employee who can help counsel them through their careers while actively seeking opportunities for their advancement at the firm.
2. Map out clear career paths
Employees who know they're on track for future advancement are more likely to stay with a firm. You can provide this visibility by establishing career paths that include clearly defined job descriptions and expectations, as well as the training and skills needed to achieve those positions.
For example, RIA firms can break down client service roles into clear tiers, such as client service associate, client relationship manager, and senior client relationship manager. Other career paths might focus on achieving management positions, such as CIO, CFO, and COO. Based on these paths, mentors or managers can work one-on-one with employees to map out their career goals and trajectory, and then conduct regular check-ins to measure progress.
3. Offer attractive salary and incentives
It goes without saying that higher pay helps retain workers. But adding incentive-based pay and bonuses on top of base salary can align employees' personal compensation with the firm's success. Other non-salary incentives such as annual leave, flexible work arrangements, time to volunteer, and wellness initiatives can also keep staff feeling valued.
In fact, our 2020 RIA Compensation Report: An Addendum to the 2020 Benchmarking Study found that base salary at RIA firms really is just a base: Employees in revenue-generating roles received 70% of their pay in base salary. The rest came in the form of performance-based incentive pay, compensation tied to revenue generation, and owner profit distributions.
4. Develop an inclusive culture
Making a commitment to inclusiveness helps keep employees feeling engaged in the firm's mission and empowered to meet their full potential. Fostering inclusivity starts by ensuring that all employees have opportunities to give feedback and share ideas with the firm's leaders. Similarly, leaders should include junior employees on key teams or special initiatives that are likely to shape the future of the firm. Taking inclusivity a step further involves creating affinity groups and professional networks that allow women and minority employees to build relationships and find mutual support.
Such programs must start at the top, with company leaders on board, engaged, and accountable. Measuring managers' performance on key metrics such as turnover, promotion rates, and employee satisfaction can provide important data on the success of your inclusivity efforts.
Successful firms retain talent
There's a connection between an RIA firm's overall performance and its ability to retain employees. Our latest RIA Benchmarking Study found that 59% of firms with AUM of more than $250 million experienced staff attrition. Yet staff attrition dropped to just 42% among top-performing firms.
Keeping your staff on board requires investments in the form of training and development, attractive compensation models, and fostering an inclusive work environment. But like other investments, a long-term commitment to retention can reward your firm with solid returns.
What you can do next
- Visit our Talent Resource Center to find tools and resources to build, manage and evolve your talent strategy as your firm grows.
- Consider a custodian that invests in your success. If you're thinking about becoming an independent advisor, contact us to learn more about the benefits of a Schwab custodial relationship.