The United States is in the midst of an employment phenomenon commonly referred to as the Great Resignation. Millions of people have left the workforce over the past two years, resulting in a labor shortage that affects nearly every industry, including financial advisory firms.
This has made it even more difficult than usual for consulting firms to hire and retain staff, including associate consultants. To thrive in this environment, companies must develop targeted strategies to recruit and retain the best talent in the industry.
What are the best advisors looking for?
Attracting successful advisors to your firm can be difficult, especially in today’s environment. For every available advisor, there may be 20 other companies competing for their attention. The good news is that advisors looking for a new home will likely be attracted to what you have to offer: independence.
The first step in creating a recruitment and retention plan is to determine what the best financial advisors are looking for in a consulting firm. According to data compiled by Diamond Consultants, most financial advisors want to work for companies that offer:
- A robust technology platform and infrastructure;
- A favorable compensation package;
- The ability to grow with the business; and
- A high degree of freedom, flexibility and control.
Recruit new advisors
The next step is to identify the best sources from which to recruit new advisors. The most common strategy is to alienate advisers from other firms. This is not surprising considering that depending on their contractual arrangement, these advisors could bring their business portfolio with them, which would translate into an immediate increase in assets under management for your business. Here are some other ideas for recruiting and hiring advisors:
• Use all available resources. There are so many more recruiting resources today. These include online job sites such as Monster and ZipRecruiter, your company’s website and social media, centers of influence (e.g. lawyers, bankers, CPAs), chapters local financial planning associations such as FPA and NAPFA, trade publications and websites, and your existing customers.
• Tap into your professional network. Word of mouth networking often tends to be the most effective strategy for finding new advisors. Let other professionals in your centers of influence know that you are looking for new talent. You can even offer to pay a referral bonus for any referrals that lead to successful hires.
• Offer an internship program. Talk to area colleges and universities that offer financial planning avenues for creating a formal internship program. For example, you can bring in one or two students each semester as interns and pay each student a small stipend. If they do well and fit into your culture, you can offer them jobs as associates after they graduate. They will likely be better able to get started quickly since they already have work experience in your business.
Structure your compensation package
Financial advisors take on jobs for many different reasons, but money is usually at or near the top of the list. Therefore, you must offer attractive compensation if you expect the best advisors to come to work for you. This not only includes a competitive salary, but also health insurance, a retirement plan and paid vacation.
Many advisors today also expect an incentive compensation plan with commissions or bonuses, so they are rewarded for higher production. According to industry studies, more than three-quarters of consulting firms compensate their staff with some form of performance-based incentive compensation.
Top advisors can also expect equity and earn-outs. Ideally, shares should only be offered to more experienced advisors who can add tangible value to your business, although you can use potential future ownership as a carrot to attract younger advisors with potential.
Best Practices: 7 Tips for Recruiting and Retaining Advisors
Consider the following best practices for attracting, hiring, and retaining the best financial advisors in your business:
1. Share your story. Make sure potential candidates know your company is a great place to work. In today’s digital world, there are many ways to tell your story, such as your website and social media. Also use resources such as your clearing company relationship managers, centers of influence (e.g. CPAs and attorneys), business development teams, conferences, collateral documents, traditional media and public relations.
2. Differentiate your firm from the competition. Be prepared to demonstrate what sets your firm apart from other consulting firms. For example, do you offer superior product solutions or a unique product portfolio? What about the latest cutting-edge technologies and open architecture? Do you have a unique brand identity and a strong reputation in the local market? Or strong marketing programs to help generate new leads for advisors? And what about future partnership opportunities for advisors who excel in their work?
3. Refine your value proposition. You need to create a value proposition that resonates with advisor candidates and sets your business apart. Some examples :
- Boutique diversified financial services firm
- Trust and transparency
- Principles acclaimed and recognized by the industry
- Conflict-Free Consulting Services
- Cooperative partnership
4. Don’t try too hard to “sell” candidates for your company. It’s tempting to go out of your way to convince candidates that yours is the best consulting firm and that you have no downsides. But no business is perfect, so don’t be afraid to recognize your weaknesses and a competitor’s strengths. Also, don’t use company colloquialisms when talking to candidates like “just touch base”, “check in”, or “turn around”. And when contacting candidates, call with something to offer like new developments in your company or an industry update.
5. Invest in technology. Most top advisors don’t want to work for companies that skimp on their tech stack, so having the latest technology is key to hiring and retaining them. Tech-savvy advisors typically have higher AUM levels, higher AUMs per client, and higher compensation than other advisors. Modern advisor technology typically includes financial planning software, account aggregation tools, portfolio management software, and document management systems, among others.
6. Mentor and coach new advisors. The best young advisors generally appreciate coaching and mentoring from more experienced advisors because they know how much it can help them succeed. Therefore, assign an experienced coach or mentor to work closely with new advisors and teach them the “tricks of the trade.” Make sure potential candidates are aware of your commitment to coaching and mentoring during the interview process.
7. Provide career opportunities. Finally, remember that most of the best financial advisors are looking for more than just a job; they seek a career in the company of their choice. This is especially true for new advisors just starting out. To attract them to your company, present a career advancement path with specific milestones for promotions, pay raises, and greater responsibility. This way they can see where they could be in their career in three, five or even 10 years.
So far, there is no indication that the stress of the labor shortage caused by the Great Resignation will soon ease. It is therefore essential to create a recruitment and retention plan designed to attract the most talented and competent financial advisors and keep them with your business for the long term.
Gino DeRango is senior vice president at Axos Advisor Services.