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The search for talent continues to be a focus for RIAs of all sizes. The tight labor market is pressuring recruiting processes as firms receive fewer applications, are forced to move quickly when hiring, and have trouble finding candidates with the ideal skillset. A recent AGS compensation trends survey found that 85% of RIAs hired new contributors in the last 12 months. These new hires included roles with higher turnover like client service associate, as well as advisory roles to expand capacity and growth. A surprising number of firms (20%) hired for key management positions. As firms seek talented team members to fill open positions, they are reevaluating recruiting channels, pay scales, and benefits packages to stay competitive in the hiring market.
Large RIAs, who hire dozens of contributors each year, often have better defined recruiting and hiring processes. Smaller firms often rely on personal networks to identify candidates, while larger firms dedicate resources to the hiring process and target a talent pool beyond the networks of team members to fill open positions. This results in slightly more diverse advisory teams. At firms over $1B, 87% of RIAs have female advisors, versus 78% at firms smaller than $1B. At firms over $1B, 60% of firms have advisors of color, while only 42% of firms under $1B have an advisor of color.
As recruiting advisors with experience is difficult, I see RIAs building diverse teams and focusing on development as they recruit people who are not currently advisors. Many of my clients have had success in hiring career changers into associate advisor positions and developing them into productive lead advisors. Other firms have looked internally at contributors in operational or service roles who may have the interest and aptitude to become advisors. For this to be successful, firms need to clearly define training and development for all roles in the organization, and outline career paths to ensure there are clear expectations.
Beyond the benefit of expanding the firm’s human capital, diverse advisory teams access a wider target client base. Human nature is such that most prospective clients are more likely to be comfortable discussing the intimate details of their financial life with someone like themselves, whether that means a woman or person of similar ethnicity or background, who they feel can understand where they are coming from and can relate to their personal situation.
As RIAs address the need for talented advisors to build capacity, many hire advisors from other firms or even acquire teams to fill those open positions immediately. Cerulli reported the advisor headcount across the profession has remained largely consistent over the last 10 years, at 280,000-290,000. Over the same time, advisor-managed assets have increased from $12.2T to $30.7T. Cerulli also noted that 37% of advisors plan to retire in the next 10 years – there will be a need to find, train, and retain new advisors to continue to support clients and develop new relationships. Given the competitive nature of the labor market, it would be beneficial for firms to think longer term and train advisors up internally, as the labor market has no signs of turning – the wealth management profession is growing quickly, and almost all firms are looking to hire advisors to create capacity. As firms look beyond the advisor pool, the profession is moving towards increasing diversity. While some RIAs focus explicitly on diversity in hiring, large firms are demonstrating that the sheer number of hires and the need to seek talented contributors outside of personal networks is making the advisory teams more diverse. Well-defined and competitive compensation and equity plans are a crucial part of retaining advisory talent in this tight labor market.
The financial advisory profession is still in the early years of its development. Firms that intend to grow must start planning. Building a defined process for recruiting, training and professional development programs to grow advisors in-house, and defining career paths to support an equitable opportunity is a crucial step towards a strong and diverse team.
Cerulli reported in June that 72% of trainee advisors at wirehouses dropped out before becoming advisors; it recommended team structure and recruiting advisors from other roles in financial services to combat this turnover. As the profession requires more advisors, targeting a wider talent pool and creating a structure to support their success is essential. Considering your current and future desired client base – and the advisors who will be needed to support these relationships – will set the stage for future success.
Rebecca Daves is a consultant with Advisor Growth Strategies, a management consulting and transaction advisory firm exclusively for financial advisory firms and institutions looking to aggressively grow or solve a key management challenge.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.