A veteran independent advisor, Joe Ventura needs junior associates with sufficient get-up-and-go to help attract new business. Trouble is, he's having a tough time finding them. As usual, we turned to our panel of experts: Hellen Davis, president of Indaba Training Specialists, a management consulting and training firm in Treasure Island, Fla.; Philip Palaveev, president of Fusion Financial, an Elmsford, N.Y.-based network of advisors; and Chip Roame, managing principal of Tiburon Strategic Advisors, a Tiburon, Calif.-based market research and strategy consulting firm for financial institutions and investment managers.
Ever since Joe Ventura started his practice 14 years ago, he's been a recruiting machine. And yet, all along, he's faced a singular challenge: finding advisors with what he calls “an entrepreneurial spirit,” individuals who are self-directed and creative about getting new business. After all, he needs help expanding his Latham, NY-based practice. What's more, not long ago, a handful of advisors left his firm, William Tell Financial Services, to go out on their own — and now he's scrambling to replace them.
When Ventura graduated from Western Oneonta State College in 1984, he intended to become an actor. For two years, he worked for the Empire State Institute for the Performing Arts, a state-run theater group. At the same time, Ventura had always shown an affinity for finance. So, to help make ends meet, he started selling insurance and mutual fund products for a local insurance company. Finally, when his boss at Empire State asked him, point blank, which profession he planned to pursue, Ventura decided it was time to give up the theater. “Just one year in the insurance industry showed me how much more lucrative it was,” he says.
He worked for the insurance company until 1995, when he left to start his own advisory practice. But, almost from the start, he had a problem. According to Ventura, the area, which is next to the state capitol, tends to attract bureaucratic, buttoned-down types — “Terrible prospectors,” he says. There's not a big pool of go-getters, the types he feel could help him bring in the new business his practice needs.
For many years, Ventura tried to address that dilemma with a financial arrangement aimed at helping new advisors develop their own books of business. Advisors could work with their own clients, as well as some of Ventura's new accounts, gradually taking on more responsibility for the business and allowing the boss to step back. He offered a 60-40 revenue split that, more recently, he changed to 50-50.
Then, in August, five advisors up and left — causing Ventura to rethink his strategy radically. To rebuild the practice back to 10 or 11 advisors, he's offering a completely different deal to new hires: a salary, with the potential for a bonus. He'll also put them through a 13-week training program. After that, they'll only work with existing clients and won't do any prospecting. (He's also introducing a non-compete agreement). The move will allow Ventura more time to focus on being the rainmaker. “I'm good at opening doors,” he says. To contact potential recruits he's trying a few avenues: direct mail and personal phone calls to referrals, as well as placing ads in the local paper and local Internet hiring sites. Today his assets under management are at around $70 million, down from about $120 million last year. That drop was partly due to the market decline, and partly due to the assets the recently departed advisors took with them.
The biggest problem is the paradox he's created. He wants entrepreneurial people to work for him. But entrepreneurial people are never satisfied working for anyone else. It's not in their nature. They will only do so if they have to, but as soon as they build up their books, they'll leave. And if he teaches them to prospect, they're going to leave him. It's that simple. The biggest challenge in this business is the ability to prospect efficiently. So, if advisors can prospect, if they have their own pipeline of business, why would they give 50 percent of that business away?
What he needs to say is, “I don't really want entrepreneurial people. I want salespeople who can't prospect.” He can be the prospecting machine. It's the only way it will work. He should bring in all the deals and farm them out to other advisors afterwards.
Locking them up with a non-compete is important. Non-competes are enforceable if you're talking 12 months. In every occasion I've seen a 12-month non-compete with an existing firm's clients, the practice has always won. Another step is to have all the business written with his name as the primary rep and the other as secondary. In that case, unless you're the primary person, you usually can't get the client records without permission.
Salary plus bonus is a good idea. Also, it would be difficult to go up against the non-compete as a salaried employee. I'd do graduated bonuses, stepping up the amount as the advisor hits critical milestones.
He wants a team player who's a service-minded salesperson. If he keeps saying that to himself, he'll make it happen.
This advisor has, for lack of a better term, become a branch manager for younger advisors.
At the end of the day it boils down to, what is the value proposition of a firm like his? What does he really provide to younger advisors? Does William Tell function as a firm with 10 or 11 advisors with a shared arrangement or is it some sort of loose affiliation of advisors? At Moss Adams, we called these silo arrangements. It sounds like he's been more of a silo operation, providing housing, training and infrastructure to advisors. That doesn't create a strong firm. As soon as advisors start getting enough business, they go out on their own. Look at it this way: We all would like to have our own house, but can't necessarily afford it. When we grow up and can support ourselves, we move out.
The change he's making is on the right track. Salary plus bonus is a great compensation model. Delegating the business to them is the right thing to do. The problem with young advisors is that, although they may have a lot of technical knowledge, they lack the ability to develop new business. It takes about ten years to learn how to do that. But, often, younger people have to start developing business from day one with little ability to do so. That's why many quit. Those that survive and learn to develop business are hard to hold onto.
My suggestion is that he offer a career path for these advisors — and consider allowing the better advisors to become owners of the firm. From there, he has to be thinking, how can he develop business for the firm, not Joe Ventura. Also, it's very important to have a non-compete, non-solicitation protection in place.
Where does he find these people? I would look at the wirehouse offices in his area. The wirehouses have significantly curtailed their training and recruiting programs. They're laying off less-productive advisors, and that's usually the less-experienced people. And I would definitely look at the local FPA chapter and network with CPAs, wholesalers and anyone else who works with advisors. If he makes it known he's looking for inexperienced junior advisors, the word will get around.
Mr. Ventura is facing a conflict and I don't think he realizes it. He's trying to recruit people who won't want to stay with him. If I'm going out and getting the business myself, why would I want to work for someone else? It's not about being in Albany with a bunch of bureaucrats. It's that he's looking for an impossible combination — entrepreneurs who will be able to sell, create rain and be employees.
He has to rethink his business model. To that end, he has two choices. Choice one — not the one I'd recommend — is to offer a very high payout rate to attract an entrepreneur who simply doesn't want to administer a company. So, the entrepreneur would think, “I can make 100 cents on the dollar if I set up a business. But if you offer me 80 cents on the dollar and you take care of everything, it's worth it to me to take the cut.”
The second one relates to the fact that he's good at bringing in business. It plays to a very different person — the conservative, no-risk-taker. You find clients, hand them off to this individual and go find more. First meeting you're there with the advisor and client, second meeting you're there for a shorter time, and so on. That person would be paid a fixed salary.
That guy is easy to find. He can even try Craigslist. It's a slam dunk. The other one — the advisor who wants to work for me but is an entrepreneur — I don't think you can find that person.