Financial advisory firms are gearing up to do more hiring in the months to come, according to a recent Fidelity Investments survey. But adding staff this year may be trickier than just posting ads and waiting for the resumes to pour in. Two advisors who are looking to add talent told Registered Rep. they found plenty of applicants—but few who are the right fit.
Jerry Johnson, president of Meristem, a family office practice in Minnetonka, Minn., says marketing and back-office jobs are easy to fill, but finding associates who can work with clients and have some financial expertise is another story. “We can find plenty of people to interview, but maybe not people who have the right balance of skills that we’re looking for. It’s much tighter than we would have expected, quite honestly.” Even the search firm they hired to help fill two new positions in their client advisor group this year was surprised at how difficult it was. Johnson says he is resigned to paying more for the positions than he had expected; a competitor in town who had interviewed an applicant that Meristem was interested in had offered 20 percent more than what Johnson had planned to pay, he says, and Meristem tries to pay in the top quartile.
Jeffrey J. Powell, president and CEO at Polaris Equity Management in San Francisco, has been looking to fill two new spots for the past month: a sales executive and an advisor with a CFP. The key is having a way to filter applicants: “It’s like trying to take a drink of water out of a fire house,” Powell says. One twist he’s seen is the number of applicants who are struggling financially. After uncovering credit issues with one applicant late in the interview process, Powell decided he needed to tell jobseekers at the start of the process that they should expect a credit review and a background check. “I don’t want anybody cutting corners with the way we operate, especially in a sales process,” he says. “It’s like being a parent and saying, ‘Do as I say, not as I do.’”
Maybe the demand for quality talent is simply outstripping the supply. After all, most financial advisory firms seem to be in hiring mode, and prepared to spend on growth. The Fidelity survey, which went out to 130 independent broker/dealer and RIA advisors who were among the attendees at its Executive Forum event last month, found that three-quarters of respondents were planning to hire up to 30 percent more employees in the next 12 months. And in a telephone survey of 500 RIAs conducted in late March, TD Ameritrade found that 34 percent said they had increased spending on their practice in the previous three months, with 27 percent saying they had spent more on staffing.
Why hire now? For many advisors, it’s a matter of returning to growth mode after a period of hiring freezes and crisis management following the economy’s downturn. Powell says his practice’s assets have doubled since 2007 to $260 million. At Meristem, Johnson says, the hiring has been turned off for three years, “and people are tired. It’s been a lot of work. Clients have needed us more than ever. We’re at a point now where, while the economy isn’t great, we realize what we’re dealing with and we’re comfortable that financially, we can handle it.”
Johnson, whose firm employs 40 and has $1.7 billion in assets, says he feels vindicated by the changes in his market. The biggest financial firms were bloodied by the collapse in 2008, and investors are looking at consolidations within the industry and wondering if the firm they work with is the same one they started with. “We always thought, ‘We’ve just got to hold on to our key people, because the other end of this is going to be, maybe, the opportunity of a lifetime,’” he says.
But the effects of the financial crisis cut both ways where finding good talent is concerned, Johnson says. The market of good people looking for new jobs has narrowed, he says. Many people who lost their financial industry jobs in 2008 and 2009 have left the industry, he believes. The ones who kept their jobs are disinclined to jump ship right now. “They’re loyal to the firm they’re at because the firm was loyal to them,” Johnson says. There’s also the problem of leaving the security of a shop and being the least senior person at a new company that might have to engage in more layoffs, he adds.
Consultants who work with advisors on personnel issues say the Fidelity findings on hiring square with their own experiences. “The predominate need has been around client-facing individuals, advisors who know how to serve clients well, can manage relationships at a very sophisticated level, and who are capable as well of bringing in new business,” says Scott Slater, managing director, business consulting at Schwab Advisor Services. Among the services that Schwab offers to financial advisors is consulting around best strategies for hiring new staff, including a three-month timeline that breaks out the steps in the process—from notifying recruiters to the hiring decision itself.
George Tamer, director of strategic relationships at TD Ameritrade, says advisors are drawing more assets from larger brokerages, and they want to scale up to manage it. He and Slater agree that an important need when hiring is to ensure that the applicant fits the culture of the practice, or as Tamer puts it, has “the same outlook, the same ideas about clients they want to work with, the same investment management approach.” It also helps to have people whose skill sets are different from your own, and can fill in gaps in the practice, Tamer adds.
Meanwhile, more small brokerages are signing onto the Broker Protocol, an industry agreement that allows financial advisors to take certain client information with them when they move from one firm to another without incurring legal reprisals. That’s a sure sign that they’re interested in boosting assets by hiring advisors from wirehouses and larger firms, says Fred St Laurent, managing director of executive search at Chase Professionals. He warns practices to check the production runs of applicant advisors for the previous four to five years; “If you don’t see growth, they’re not going to grow here,” he says.
One misstep that can complicate hiring is waiting too long to do it, Slater says. Some advisors feel they’re too busy, or that managing expenses is a more important priority for the practice. Slater warns that if you wait until your practice is operating at capacity, then you might find yourself under pressure to fill a vacancy quickly and to overlook gaps in an applicant’s qualifications. He suggests advisors set up a business model that outlines the optimum number of client relationships per advisor in the practice, and then start looking to add staff when the advisor is at 60 or 75 percent of that goal. The process can take months.
Ultimately, hiring talent is a lot like prospecting for new clients. Slater says advisors should always have their antenna out; he suggests spending time at the local chapters of national trade groups like IMCA or the Financial Planning Association.
And don’t forget background checks. Tamer says one advisor was surprised to learn that an applicant had provided him with a doctored diploma. He had been looking for upfront money to join the practice because he was bringing his own book of business with him, Tamer says.