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by Phil Fiore
With the war for talent showing no signs of abating, recruiting has become a top priority for advisory firms. It’s by far “the biggest concern” RIAs say the face today with respect to talent, according to a survey in the 2022 Talent Management Study from San Francisco-based RIA consultancy DeVoe & Co.
Advisory firms currently have an average of three open positions, according to an Ameriprise survey.
Andrii Yalanskyi/Dreamstime
“We’re in a state of distress in this industry right now,” says the firm’s principal, David DeVoe. “Good people are hard to find.”
The most recent Charles Schwab RIA Benchmarking Study concurs: “Talent is the top strategic priority for RIAs.”
Indeed, it’s been a perfect storm for financial advisory firms: a rapidly aging workforce, a lack of young advisors to take their place, a pandemic-induced Great Resignation, and massive competition from financial-service giants.
Over one-third of financial advisors are likely to retire within the next 10 years, according to a recent study by Cerulli Associates. Advisory firms currently have an average of three open positions, a survey by Ameriprise Financial reveals. Almost half of employees in the U.S. are looking for a new job or plan to soon, according to a new survey from executive search firm Willis Towers Watson . Fidelity Investments is aiming to make around 28,000 hires in the next two years, and Vanguard and Charles Schwab aren’t far behind.
“The market for advisor talent is as tough as I’ve seen it in 20 years,” says Caleb Brown, CEO of New Planner Recruiting. “Before the pandemic, about 30% to 40% of job candidates had multiple competing offers. Now it’s 100%.”
So how are RIAs recruiting?
New York-based Wealthstream Advisors has turned to colleges. Every year the firm surveys colleges with financial planning programs that also attract students from the East Coast, says Michael Kimmel, senior advisor in charge of recruiting. Wealthstream then decides which schools to visit and sends out descriptions of job openings and internships. When executives visit a campus, they attend financial planning classes, teach, and talk to students about the firm, the RIA business, and life in New York City. And they conduct interviews.
Back in the office, the Wealthstream advisors select the best candidates, ask them to write up a case study, and fly them to New York to make a presentation. After being interviewed by people in the firm, finalists are given what Kimmel calls “third-party assessments,” including a personality test and tests for numerical reasoning and critical thinking.
“We want to make sure we don’t miss anything,” Kimmel says. “You’re looking for the right balance between technical knowledge and soft skills.”
The process has worked well, says Wealthstream President Michael Goodman. “You have to be willing to commit to it and develop HR skills,” Goodman says, “but it’s been very rewarding, and we’ve seen hires like Katharine George make vital contributions to the firm.”
George, who graduated from Virginia Tech in 2017 and is now a senior advisor at Wealthstream, says she was impressed by Wealthstream’s rigorous interviewing process. “The process was very robotic and impersonal at other firms, where you just filled out some forms,” she says. “Wealthstream took the time to find out about me and explained their culture and what it was like to live in New York City. It felt like they were making an investment that benefitted both of us.”
By contrast, Procyon in Shelton, Conn., uses LinkedIn to target experienced advisors who are interested in becoming equity partners.
Procyon takes notice of advisors who start to follow the firm on LinkedIn and read its posts, says Phil Fiore, partner and executive managing director at the RIA. “We then target the people we want to attract. If they respond, we tell them we’d love to have a conversation.”
After talking to candidates, Procyon sends the names of finalists to its outsourcing affiliate, Dynasty Financial Partners, which helps the firm screen for the best hire.
Advisors who do come on board “want to continue to grow and are looking for a path to partnership,” Fiore says. “They want to be part of something much larger than where they are.”
Even though offering equity is becoming increasingly popular in a hypercompetitive recruiting environment, DeVoe of DeVoe & Co. counsels against it.
“I caution firms to stop short, even though it’s tempting in this market,” DeVoe says. “I recommend that a new hire work for the firm at least one year before offering them equity. Equity is a big deal. A candidate may dazzle you in an interview, but if they don’t turn out to be the right fit, it becomes quite a hairball and difficult to untie that knot.”
Then there’s good old-fashioned cash compensation, which has hardly gone out of style as a recruiting tool.
In 2019, advisors making a lateral move usually received a 10% pay raise from a new employer, says Brown of New Planner Recruiting. Today, compensation increase for a lateral move “is unlikely to be anything less than 20% or 25%.”
Jason Fertitta, chief executive of Americana Partners in Houston, is blunt: Americana hires top advisors away from other RIAs, banks, and “big bulge-bracket firms” by offering them more money. “If you hire the best, you can pay them more,” Fertitta says. “It’s actually a smart move — one of them can do the work of two.”
To build a team of “Navy Seals,” Americana is willing to offer a generous incentive payout: 45% of the revenue the advisor brings in. Success at Americana is straightforward, says Fertitta, who was a former managing director at Morgan Stanley’s Private Wealth division: “Math dictates the path.”
But other RIAs, including DBR & Co. in Pittsburgh, say higher compensation is not the primary motivation for many advisors they recruit.
David Root, the firm’s founder and CEO, most recently used an executive search firm to hire an advisor who had worked in a local bank. “We matched her salary and gave her a bonus, but the advisor really wanted to be more entrepreneurial than she could be at a big bank,” says Root. “She wanted to be closer to the client and have an impact at the firm.”
Younger advisors, Root says, are also attracted to the firm’s philosophy of viewing itself as a “teaching hospital” where new hires are immediately immersed in all aspects of the business from meeting clients to participating in reviews and presenting quarterly reports.
“This approach mirrors what our large healthcare organization clients do,” Root explains, “and gives new hires a way to quickly ascertain what they’re getting into and what track they want to take.”
Other keys to attracting new recruits to RIAs include being able to show growth, having a diverse workforce and client base, outlining a career path, and making work-life balance a priority, industry executives say.
“You have to look at nonfinancial components of what it’s like to be an employee at the firm: recognition, well-being, career pathing, learning, and development,” Carol Benz chief people officer at RIA aggregator Cerity Partners said at DeVoe’s Elevate conference in Las Vegas this spring.
RIAs should have a recruiting checklist, New Planner Recruiting’s Brown says.
“They should have best-in-class technology, a new website, a team culture, client and team member diversity, and revenue and profitability growth,” he says. “And remember that job seekers want to know what they will learn at the job and how the opportunity will get them to where they want to go in their career and life.”
Some fun benefits wouldn’t hurt either.
“In this kind of market,” Brown adds, “we’re seeing firms offer Netflix subscriptions, Door Dash accounts, gym memberships, and massage therapy. Firms are being very creative.” And given the shortage of new talent, very determined.
