2021 has been a good year for CEO pay at RIAs

It’s good to be king or queen of an RIA when it comes to total compensation, with executives the only positions at registered investment adviser firms that saw significant compensation boosts over the past year, according to a new study from InvestmentNews Research.

For the rest of the staff, particularly advisers, pay remained flat this year compared to the previous couple of years, according to the InvestmentNews 2021 Adviser Compensation & Staffing Study sponsored by BNY Mellon Pershing.

The industry recorded another year of growth in assets under management, revenue, profits and valuations, according to the study. However, despite prosperity at the firm level, compensation for most positions has shown little growth over the past few years.

The exception was the compensation for chief executives and chief operating officers. Indeed, executives are the only positions with significant compensation increases over the past year, according to the study, which included 193 firms.

CEOs earned a median salary of $285,000 in 2021, compared to $250,000 in 2020, or 14% growth. COOs enjoyed even greater salary gain of around 23%, earning $150,000 in 2020 and $185,000 in 2021.

HIRING PATTERNS

These increases in executive compensation are perhaps explained by hiring and recruitment patterns, according to the study.

As advisory firms grow, they are more likely to appoint or hire full-time executives, particularly a CEO and COO. More than 78% of the largest firms in the study, or those generating more than $10 million in annual revenue, report having a dedicated CEO, with 78% also reporting a dedicated COO.

Midsize RIAs, or those with annual revenue between $5 million and $10 million, are also more likely to have a full-time CEO, with 73% of participating firms reporting the position, along with 50% reporting a full-time COO.

Even though advisory firms were doing well financially, the study shows that didn’t translate into big pay raises for most positions.

The position of adviser or lead adviser has not experienced any increase in base compensation, and the same holds true for practicing partners, meaning lead advisers who are also owners of the business and face higher expectations for productivity.

INCREASES AND DECREASES

Entry-level positions such as support advisers have shown modest increases in compensation, while others, including client service administrators, have seen modest decreases in compensation over the same period.

Lead advisers responsible for client relationships earned a median salary of $132,000 in 2021 compared to $135,000 in 2020 and $140,000 in 2019. The salary for practicing partners has seen an even greater decline over the same three-year period, from $237,000 in 2019 to $219,000 in 2020 and $200,000 in 2021.

It appears that more commonly recruited positions tend to grow in compensation, likely because they are priced to the market, according to the study.

As mentioned, service advisers experienced modest salary growth over the past year, with an increase from $80,000 in 2020 to $85,000 in 2021, while lead advisers and practicing partners both saw declines over the same period. Looking at recruitment patterns, service advisers are more frequently recruited.