There seems to be an advisor recruiting frenzy going on. As Cerulli Associates and others point out, it is more common than ever for advisors joining the independent ranks to join an existing firm. Sometimes they join as partners, sometimes as independent contractors and sometimes as employees. Whatever the case, there seem to be a couple of underlying motivations spurring this trend:
• Founding advisors want to form a legacy firm that will continue beyond them.
• Advisors are seeking to grow their firms through the production of other advisors.
It’s Not As Easy As It Sounds
Although advisor recruiting is on the rise, it’s not that easy to get an advisor to join your firm. Recruiting is a skill set that some advisors neither understand nor appreciate. The dubious assumption is that advisors (especially those captive in a wirehouse environment) would want the freedom of the independent channel, especially if the advisor can join an existing firm.
Joining an existing firm is akin to entering a “halfway house” where the recruited advisor doesn’t have to be a pure entrepreneur and create everything on his or her own from scratch. Instead, the advisor can piggyback off the work done to date by another advisor.
But it’s not that logical. Many recruiting advisors find that the process of “selling” their firm to a potential advisor is much tougher than selling financial planning and advisory services to a potential client.
Another challenge is that recruitment is a process. Often, advisors don’t know where to start, are unprepared for how long it takes, or falsely assume that the work ends when a new advisor joins the firm. The reality is that recruitment requires patience and persistence.
Five Questions Add Clarity To Decision-Making
Those who are recruiting advisors would be well served to get clear about a number of issues before jumping into recruiting activity. For example, the following five questions are a great starting point for adding clarity to your decision-making process.
1. Why do you want to recruit an advisor? The process looks different depending on your goals.
If it is for legacy reasons, be prepared to explain to recruits when they should expect to begin buying your book and over what time period. Telling potential advisors that they would be the recipient of your book of clients at some point in the future creates assumptions, and all too often, the recruited advisor assumes a much shorter time frame for taking over a book than the one the founder/seller had in mind.
If your motivation is to build an ensemble, be prepared to invest significant time in management. Many advisors assume that simply assembling a group of advisors automatically creates an ensemble. What it creates is a group of advisors, each motivated to do things his or her own way. Without consistent and repeatable processes for doing business, the efficiency and economy of scale sought from forming an ensemble never materialize.
If you are motivated to grow your top line, finding advisors is only the first step. Ongoing management is critical—and often unanticipated. Sometimes, advisors actively recruiting new advisors have become weary of prospecting and bored with providing financial planning for clients. They think they want to manage other advisors, only to become weary and bored with that as well.
2. What will the recruited advisor do? Since Moss Adams began producing annual industrywide benchmarking data (now transitioned and sustained by InvestmentNews), the language used in that study helps articulate the different roles that advisors play. Three titles depict three distinct roles.
Service advisors focus on conducting review meetings with existing clients and addressing client issues between meetings.
Support advisors (not to be confused with registered support staff) focus on technical information, with key responsibilities in investment management, research, rebalancing, the creation of investment models and the performance of due diligence. Support advisors may be brought into a review meeting at the request of other advisors to address technical issues of investment management.
Lead advisors focus on developing business and often hand over new clients to service advisors within the firm.
Of course, some entrepreneurs who are hiring their replacements may look for someone to lead and manage the firm as well. It is not uncommon for an advisor to seek a combination of the above job responsibilities. So be sure you are specific about what roles you want the position to fill; for example, “I want an advisor who focuses 50% on prospecting and business development and 50% on servicing existing clients,” or “I want an advisor who will run the portfolios for the firm so the existing advisors don’t spend more than 30 minutes per week on investment management.”