The financial planning industry needs 70,000 new advisors in the next five years just to keep up with growth in the number of people seeking advice on everything from homebuying to retirement. And that figure, which comes from
It all adds up to the need for a lot of new planners. Every industry's labor force is subject to the law of supply and demand, and wealth management is no exception. But while planners want to be paid well, with good benefits, an engaging work environment and a clear path to advancement, they also have specific demands — and in a competitive hiring environment, they increasingly have the power to get what they want.
Access to plum client accounts and strong compensation are important, but they're not the only ways to woo employees. Sabbatical programs, mentoring, robust career paths and partnership programs with colleges and universities all help RIAs find smart, interested potential employees.
"Think about the employee value proposition," said Lisa Salvi, the head of business consulting and education at Charles Schwab in San Francisco. "What do you expect from employees and what are you willing to give back?" The answers, she added, will help determine who gets to hire and retain the swelling ranks of workers the planning industry needs to find.
Big, traditional employers are out of favor
Recruiters once worked to get advisors into jobs at Wall Street wirehouses. Now advisors are more interested in moving from big banks and larger companies to smaller and more independent businesses.
"There's been a shift toward people who want to work at regional firms and independent advisor companies," said Michael Terrana, the resident of Terrana Group, a Chicago-based advisor recruitment and transition consulting firm. "We haven't done a recruitment deal for a big, bank-owned firm in six to eight years. Instead, we source from them. Sometimes advisors do go from one wire firm to the next, but not in the same droves that they leave wires and become independent."
Better technology and less red tape are helping to drive the shift. "The independent broker-dealer model offers best of class technology, more reasonable compliance, and book ownership," Terrana said.
It's more common for teams to seek partial independence through affiliation when they leave wirehouses, but Roy and David Gutierrez took around a decade to go all the way. Here's what advisors can learn from their approach.
But money is still a primary driver. Planners want to be compensated for their books of business, whether they're entering a new firm or retiring.
"A big bank-owned firm will pay me one times revenue for my book," Terrana said. "But if I move to an independent broker-dealer model, I'll get probably two times to four times revenue and preferential tax treatment because I qualify for capital gains treatment rather than being taxed on ordinary income. If I get paid to leave a big bank and then paid again when I sell my business, that's a huge incentive."
Private equity is popular, too
Private equity firms are increasingly buying stakes in advisory practices or whole firms, sometimes combining them into large companies. Unlike their attitude toward big banks, "planners want to work for those huge companies," Terrana said.
Private equity firms pay between five and six times book value to the planners they hire.
"Normally you could get three to four times book value," Terrana said. "You could get one and a half to two times that if the purchaser is owned by a private equity firm."
Advisors want to work remotely
One reason some advisors prefer smaller firms is that they're more likely to offer flexible working conditions.
"Some of the big bank-owned firms would like to see advisors in the office at least half the time," Terrana said. "Smaller firms aren't so concerned."
Many companies were more or less forced to let employees work from home during the worst of the COVID-19 pandemic, and by and large the experiment succeeded, with advisors demonstrating that they can carry out business effectively from nearly any setting. Small firms' willingness to let them continue doing exactly that makes them appealing employers.
On another front, changing client expectations have made working from home and being more transparent about family obligations, such as childcare, more acceptable. Many clients, especially those on the younger side, don't want face-to-face meetings with their financial advisors, said Andrew Tasnady, the managing partner of Tasnady Associates in Port Washington, New York. They actively prefer telephone or Zoom meetings.
"People would rather not commute, and that desire has become much less controversial," Tasnady said.
The rising team model
Another factor that gives advisors flexibility is the growing popularity of team servicing models, in which two or more advisors share a book of clients. The team might include a junior member or people with otherwise complementary skill sets, such as one advisor who is stronger in analyzing bonds or another who connects more naturally with younger clients.
Diversity is important
All things being equal, firms appear keen to hire women and minority planners, and they're taking a variety of measures to do so.
Some firms are moving away from recruitment bonuses for existing employees who refer new hires, Schwab's Salvi said. That's because they're concerned that existing white, male employees, who dominate the profession, will help them find more of the same.
Other companies have looser requirements for production and assets for certain candidates. Tasnady said he's seen a large company adjust the trainee period to be more forgiving, reducing the rate at which new employees transition from salary to a percentage of AUM as compensation.
"I've also seen a situation where teams get bonuses for adding diverse team members," he added.
A behavioral science researcher and an HBCU planning professor gave financial advisors tangible steps that can alter the industry's legacy of exclusion.
Salvi said that some firms are also adjusting their job descriptions by removing requirements that aren't actually mandatory.
"Maybe you don't need a college education," she said. "The descriptions are going from 20 things that are nice to have to seven that are genuinely important."
In the past, branch managers have been in charge of distributing client accounts to colleagues when an employee left or retired, and white, male planners often got more than their share of the plum assignments. Now firms are trying to distribute accounts more equitably.
"There's so much growth, especially in the RIA space, that a lot of hiring needs to happen to keep up," Salvi said. "It's a tighter labor market for everyone. Really looking at it strategically and over the long term is important."
