4 ways the wealth management industry can win a war for financial advisor talent

4 ways firms can win the war for advisor talent

July 11, 2022 8:31 PM

As the wealth management industry scrambles to lure top financial talent amid a third pandemic year, two core factors are driving an advisor’s decision about who to work for. “How to Win the War for Talent,” a new research report from Arizent, the parent company of Financial Planning, breaks down the new recruiting landscape to uncover how advisors to support staff are thinking right now about compensation and work-life balance.

The Arizent study polled 599 respondents across wealth management, banking, accounting, insurance, mortgage and other industries, including 486 people at senior levels. Nearly one in three wealth management respondents, or 28%, said low compensation was the top driver of turnover.

But it’s not just about the dollars. Whether a big brokerage, small independent firm or a national or regional company, having strong administrative, information technology, front office and product development processes are crucial. Advisors want to see those necessities — especially full-time assistants — nearly as much as they want better compensation, according to the report.

Advisors also want freedom — to work remotely at least part of the time, and sometimes to work far away from a head office. One in five companies in the study said that a lack of offsite positions and flexible work locations was stymying hiring. One in four, or 24%, said that rigidity caused employees to leave.

All of this means that wealth management firms that meet employees where they want to be on pay, flexibility and autonomy from bureaucracy are positioned to land the best talent. With 90% of employers surveyed struggling to recruit, companies will need “to make dramatic changes to their policies, practices and benefits to stay competitive and fill role,” the report says.

Scroll down for four key takeaways from the Arizent survey:

A wakeup call on work-life balance

The Arizent survey found that employees are loud and clear when it comes to wanting more flexible work, higher salaries and benefits that support them in and out of the office. Still, only 12% of employers surveyed said they would budge on allowing flexible work arrangements. Even fewer (11%) said they would consider offering better and more affordable benefits and perks.

“Our employer is forcing people (even former remote employees) to come into an office location, even if it means relocating,” said one survey respondent. “This is a poor choice from senior leadership and is causing highly knowledgeable, quality talent to leave.”

As another survey respondent said: “I would allow 100% remote work for any position that could be conducted in such a manner. Right now we are forcing hybrid or fully in-office on our employees, and that just isn’t going to work any more. Companies that do not adapt to the new remote mentality will continually suffer higher-than-normal attrition rates as we lose employees to companies that allow for 100% remote work.”

Financial services recruiters like Louis Diamond, the president of headhunter Diamond Associates, said that many wealth management firms are slowly becoming more amenable to remote work, even for key support staff. And some big brokerages, including Merrill Lynch, are making it easier for top advisors to work from multiple locations.

“It used to be a nightmare for an advisor to get clearance to have both offices,” Diamond said. Now, denial of approval is “a deal breaker for many recruits.”

Competitive heat

More than half, or 56%, of respondents said that they feel competitive pressure from businesses within their industries, as opposed to from, say, Google or Amazon.

Within wealth management, the heat is coming from two places. The first is registered investment advisory firms, or RIAs. Advisors who ditch brokerages for those independent firms are “largely driven by a desire for greater control and the perceived economic advantages of independence,” according to Marina Shtyrkov, Cerulli Associates’ associate director of wealth management.

“Ultimately, the reasons vary, but it comes down to being able to run your business the way you want to — the types of clients you work with, the technology or products you can use, how you communicate with clients, which services you offer, etc.” Shtyrkov added that advisors “who chafe at top-down restrictions will continue to seek shelter in the independent channels where autonomy is king.”

Last year, more than seven in 10 advisors, or 71%, said they would prefer to work for an independent firm, according to Cerulli. The hybrid broker-dealer/independent model is now the preferred channel for one in five advisors. Purely independents are the most popular, with 30% of advisors saying they would jump to an RIA if they decided to switch firms.

Smaller broker-dealers emerge as top contenders

Competitive pressure has also ramped up from national and regional broker-dealers that compete with Wall Street brokerages.

The smaller firms have “become more flexible with recruitment deals and retention bonuses,” said Diamond. They’ve also created more ways for employee advisors to have a piece of the independence pie, by creating separate independent advisory units and “opening themselves to more channel affiliations,” he said.

Cerulli expects the national and regional channels to overtake the wirehouse channel in headcount marketshare beginning in 2021. By 2025, national/regional B-Ds are projected to control 15.3% of advisor headcount, compared to 13.5% for the wirehouse channel. Smaller brokerages “will continue to successfully recruit breakaway wirehouse teams by providing similar infrastructure and recruiting packages, paired with greater choice and a more advisor-centric culture,” Shtrykov said. The option “particularly appeals to advisors who are looking for an environment akin to the independent space, yet are reluctant to forfeit support systems.”

Diamond said that “many hybrid brokerage/advisory firms are tweaking their business models so that they look more than a purely independent firm, Diamond said. “That’s their biggest competitor — it’s not each other.”

Because I’m happy

Every advisor knows that it takes a village of support staff and functions to be happy. And overall, employees of all stripes in the wealth management industry have a relatively low burnout rate.

Nearly one in two organizations, or 45%, surveyed have the most trouble retaining HR roles, followed by middle and back-office staff, product development specialists and frontline staff. When it comes to hiring tech and IT roles, “competitive pay will be necessary to lure workers away from the competition,” the report says.

With support staff “a pain point for advisors,” Diamond said that firms that increase their thresholds for new assets will come out on top. Say you have a UBS advisor with $2 million in client assets, and the bank only offers one fully paid assistant for every $1.5 million. Other firms, Diamond said, will pay for two assistants.