Long-term incentive plans, the deferred awards such as phantom equity or profits interests that pay out based on what the firm becomes worth, have moved from an exception to a regular part of RIA compensation. In the Advisor Growth Strategies 2026 Compensation Trends Survey of RIAs, 59% of firms reported having an LTIP on top of salary and annual incentives, and another 29% said they don’t have one yet but are interested in adding it. Only 12% said they had no interest at all.
| Yes, phantom equity |
25% |
| Yes, profits interest |
20% |
| Yes, other |
8% |
| Yes, deferred compensation |
6% |
| No, but interested in adding |
29% |
| No, and not interested |
12% |
What the plans have in common is less settled than the fact that they exist. Most firms still decide who participates the same way they did when the partner group could fit around one table.
Phantom Equity and Profits Interests Lead the Field
Phantom equity, which tracks the value of real shares without transferring ownership, was the most common structure at 25% of firms. Profits interests, which give a participant a share of the firm’s appreciation above its value on the day of the grant, followed at 20%. Together, those two structures account for 45% of respondents, all of them plans whose value rises only if the firm grows. Deferred compensation arrangements (6%) and other structures (8%) made up the rest.
The appeal is similar across all of them. A firm can offer real upside to the people it most wants to keep, tie that upside to the long-term value of the business, and do it without adding fixed cost or, in the case of phantom equity, changing the cap table.
Eligibility Still Comes Down to Who Leadership Picks
Asked how they determine whether a contributor is eligible for equity or an LTIP, 60% of firms pointed to management decision or discretion. Tenure and experience were cited by 24%, and revenue or business development metrics by 22%. Another 34% have no LTIP or no eligibility criteria in place. Respondents could choose more than one answer, so some firms blend criteria, but discretion leads by a wide margin.
In a founder-led firm of a dozen people, discretion often works well enough. The founders know every contributor and can weigh judgment and client care alongside production. That gets harder as the firm adds advisors, builds teams, and starts developing its next generation of leaders. An LTIP is meant to change how people work, and it can only do that if participants can see how their work connects to what they may eventually earn. When eligibility rests on a judgment they can’t observe, the plan rewards people without steering them.
There is also a continuity problem. Discretionary criteria tend to live in the heads of the partners applying them. When those partners retire or sell, the next leadership group inherits a plan without a rulebook, and any buyer evaluating the firm will want to know who is in the plan and why.
Annual Compensation Is Already Specific
The same firms are often quite precise about what they reward year to year. Nearly half (48%) pay advisors ongoing compensation for relationships they originate, 42% offer a business development incentive, and 40% use a team or firm-based incentive. When asked for their single biggest compensation challenge, 16% named incentivizing the behaviors they want to see more of.
| Base salary |
92% |
| Discretionary bonus |
68% |
| Payout on revenue serviced |
48% |
| Pay for originated relationships |
48% |
| Business development incentive |
42% |
| Team or firm-based incentive |
40% |
| Profit sharing |
40% |
For many firms, the metrics that could anchor LTIP eligibility are already being tracked for the annual bonus. The long-term plan simply hasn’t been connected to them.
Clear Criteria Turn a Retention Tool Into a Path to Ownership
Connecting the two does not require a new system. Firms that already pay for originated relationships, business development, and team results can use those same measures, along with tenure and leadership responsibilities, to define who becomes eligible for a long-term award and what it takes to get there. Written criteria give participants a target they can work toward, and they give the firm a defined path from incentive plan participant to partner. That path matters more as valuations rise and equity becomes harder to transition in large blocks. Among surveyed firms where the largest shareholder owns less than 30% of the business, 71% added new partners in the past year.
As Brandon Kawal notes: “Talent is driving acquisitions, equitization is no longer optional, and buyers are focused on long-term incentive alignment.”
If your firm is weighing changes to compensation, incentives, or ownership, we welcome the conversation. Contact the team to schedule a call.