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Oisin's Bits: RIAs are slow to raise wages to reflect revenue and inflation • Robertson Stephens doubles AUM, making three a charm • SEC finally explains Bitcoin ETF application failures • Tenev, Bhatt get billion dollar haircuts in Robinhood stock slump

Schwab report shows RIAs hire at bargain rates but maybe not for long • 'Robertson Stephens' third go-round, second as RIA, gains steam • SEC reveals spot BTC concern--fraud • Robinhood founders lose $3.4 billion, $3.9 billion in stock slump

Friday, February 4, 2022 – 8:21 PM by Oisin Breen
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Lisa Salvi: Firms can ensure they have a compelling compensation strategy.

Schwab pegs RIA pay raise rate and talks perks

RIA revenues have soared with assets since 2015, but total RIA cash compensation--defined as salary, bonuses, profit sharing and dividends-- increased only 14.5%, well behind the market and inflation.

The devil was in the details. Pay for portfolio managers only rose seven percent. Senior relationship managers -- as a category -- realized pay bumps of more like 20%.

Equity stakes for female employees could become an issue as well. Just 23% of female employees hold company equity today. That compares with 77% of male employees, even though one in three RIA staffers have a share in their employer.

The findings were contained in the latest RIA compensation report from Schwab Advisor Services. The data ran through 2020 and noted that as yet uncalculated 2021 compensation data likely would push that pay percentage up.

The Westlake Texas, broker-dealer published its RIA compensation analysis, Feb. 1, assessing data on 13,000 staff at 1,036 RIAs. Collectively, they custody roughly $1.5 trillion at Charles Schwab and Schwab acquisitionTD Ameritrade.

"To help attract and retain top talent ... firms can ensure they have a compelling compensation strategy," says Schwab managing director for business consulting and education, Lisa Salvi, in the report. 

If the cash pay increases appear less than compelling, RIAs may be making it up more on the perk side.

Perks pay

Performance bonuses and side-benefits like childcare and added paid-time-off are also top of mind among prospective new hires, it continues.

Demand for new RIA staff should continue to put pressure on wages and perks.

If anticipated median asset growth of 12.5% year-over-year holds true, the average RIA will need to hire six staff -- many higher ranking executives in particular -- by 2025, according to the Schwab report.

By 2025, the median RIA's assets under management will likely leap from $439 million to $791 million, its client count will jump to 383 from 298, and its revenues will grow from $2.6 million to $3.8 million, Schwab reports.

Robertson Stephens finds old magic -- perhaps for real

Robertson Stephens is Lazarus, again. See: With big LPL backing, the Robertson Stephens brand revives to roll up advisors to the suddenly wealthy.

The San Francisco RIA doubled its assets under management in the last year to just under $4 billion of AUM, according to the company.

The once prominent investment banking brand went defunct in 2002 and was pulled off the scrap heap in 2013.

The name was applied to an ambitious RIA startup, which later faltered -- and was feared to be doomed amid an unlikely reboot effort. See: Robertson Stephens 3.0 gets going--amid scathing skepticism.

But it's third go-round is beginning to thrive.

"2021 was a tremendous year," says CEO Raj Bhattacharyya, in a release. See: Robertson Stephens seeks revival under new CEO after departures that included the old one

Raj Bhattacharyya
Raj Bhattacharyya took over as Roberston Stephens CEO in September 2020.

Bhattacharyya took the reins, Sept. 2020, having parachuted in from the company's private equity backer Long Arc.

Long Arc appointed him as an advisor in late 2019, and the ex- Deutsche Bank executive joined Robertson Stephens' board almost immediately after.

Long Arc's Dec. 2018 rescue of the Roberston Stephens brand drew heavy industry criticism, but it can now point to $3.9 billion in managed assets, up from $511 million at the time of its investment, and $1.5 billion when Bhattacharyya took over as CEO from Stuart Katz.

Under Katz, Roberston Stephens' AUM tripled to $1.5 billion by late 2020. A former Goldman Sachs executive, Katz joined Robertson Stephens in 2018. He continues to serve as its chief investment officer.

Roberston Stephens has also added 9 new offices since Long Arc's investment, taking its total to 12, and it employs over 62 staff, up from nine in January 2019. See: With big LPL backing, the Robertson Stephens brand revives.

No Bitcoin ETF until information is easier to obtain and share, SEC says

The Securities and Exchange Commission (SEC) unsurprisingly rejected Fidelity Investment's spot bitcoin ETF but surprisingly gave a fulsome explanation why. 

Claire Putzeys
Claire Putzeys: We reaffirm our belief in market readiness.

It's not the cryptocurrency itself that's the problem, but how and where the ETF intersects with it, the Washington, D.C. regulator explains in its latest ruling against the Boston firm's application. 

"It is essential for an exchange listing a derivative securities product ... to have the ability to obtain information necessary to detect, investigate and deter fraud and market manipulation," the SEC states.

"Bitcoin-based exchange-traded products can meet [their] obligations ... by demonstrating that the [linked] exchange has a comprehensive surveillance-sharing agreement with a regulated market of significant size related to the underlying or reference bitcoin assets," it continues.

In other words, for ETF makers to sell bitcoin investments, they must first prove a shared and systematic means of detecting wrongdoing, the regulator explains.

These fears are overblown as far as Fidelity is concerned.

"We reaffirm our belief in market readiness," its  spokeswoman Claire Putzeys told a number of publications.

The total market capitalization of all crypto currencies stands at $1.7 trillion, today, down from $2.9 trillion in November, according to Coinmarketcap.

Bitcoin has lost about 40% of its value in the last four months. See: Fidelity Investments applies its proven Peter Jubber to its unproven bitcoin unit and its launch of Fidelity Digital Funds signals it's all in on blockchain currency.

Robinhood slump knocks Tenev and Bhatt out of billionaire's club

Investors in Robinhood shares have had a miserable few months as the stock plumb new depths, and founders Vlad Tenev and Baiju Bhatt are among those getting big haircuts. 

The Menlo Park high fliers' shares (HOOD) are down almost 85% from their August high of $70.39. It hit a new low of $11.61 on Jan. 27. Shares have modestly rebounded since, and are trading at $15.24,  up 7.74% or $1.10 in mid-morning trading today (Feb. 4).

Baiju Bhatt
Baiju Bhatt's net worth pared by stock slump.

The stock has declined almost 23% in 2022, considerably underperforming the S&P 500. The index is up by about 6% over the same period. The stock now trades at almost 60% below its July 2021 IPO price, according to the NASDAQ. 

As a result, Tenev and Bhatt no longer sit at the billionaires table, according to Forbes.  The magazine estimates their respective net worth at $845 million and $911 million, down from a peak of $4.3 billion and $4.9 billion in August.

The better news is that the young entrepreneurs will be able to pay rent and expenses. Each cashed out about $100 million in stock at the time of the IPO when shares were trading around $38. 

The share losses reflect painful losses by the company itself.

Robinhood posted losses of $423 million in the fourth quarter, compared to a $13 million profit in the same quarter, 2020. Its annual average revenues per user also fell 5%, and revenues of $363 million came in 19% lower than industry forecasts of $444 million.

Related Moves

Robinhood gets 'brilliant' upper manager -- and a spare CEO -- by nabbing TD Ameritrade's ex-thinkorswim top exec, hopefully to throw a lifesaver to Robinhood's sinking stock

The Menlo Park, Calif., firm nabbed Steve Quirk as first-ever chief brokerage officer to 'bridge the gap between academia and reality.'

January 6, 2022 – 10:33 PM

Fidelity Investments is paying 2,000 employees to hasten their corporate exits, including high-profile RIA overseer, Sanjiv Mirchandani, as part of its shift to a digital future

The Boston giant offered voluntary buyout packages and the 4% of staff who accepted will leave by June 30 to give other staff room to grow careers and make room for hires.

June 24, 2021 – 5:39 PM

Mark Tibergien sets up Ben Harrison to challenge Schwabitrade with a $150 million cut to Pershing's minimum and millions more to develop Veo-busting technology

The CEO suite hand-off in Jersey City pulls a trigger on a plan to bypass Fidelity's and eventually Schwab's custody units by luring disaffected RIAs.

March 11, 2020 – 7:58 AM

Robinhood shares spike 25% after CEO Vlad Tenev finally goes back on the attack against Acorns, Fidelity, and Schwabitrade by adding their tricks and features to its quiver

Semi-commoditized by giants and upstarts alike, the Menlo Park, Calif. firm is extending trading hours and doing its own Acorns-style round-up debit card to show it's in the fight.

March 29, 2022 – 7:19 PM

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