Poaching talent may sound like a good idea but few firms have had a lot of success doing it, which is understandable. As a friend of mine once pointed out, good firms do not let their good people get hired away.
Thus, instead of getting talent, poachers more often have the privilege of acquiring someone else’s problems—individuals who won’t play nice with others or are not very productive or just are not that good.
That said, some buyers have been able to get large blocks of additional talent through acquisitions. However, this has not been the case in a majority of transactions because most such deals are “tuck-ins”—i.e., a roll-up acquiring a book of old clients with old employees and folding it into a platform. Roll-ups are economically analogous to buying up a bunch of depleting oil wells—they add scale but not talent.
In contrast, successful transactions (from a talent perspective) have involved big firms buying other big firms—deals which are very hard to find and are “put-a-drill through-the side-of-your-head” complex and painful to consummate. Even more problematic, prices for firms with good talent have gone through the roof.
I recognize that none of this is very cheery for anyone who owns a wealth manager. It’s challenging, time consuming and risky to try and develop additional talent. Stealing it has been largely unsuccessful and buying it is difficult, expensive and unlikely. However, as an outside observer of the industry, it strikes me that the industry’s current talent shortage may actually be the result of a self-inflicted wound.
In particular, most firms rely on a business model that is incredibly dependent on a small number of “uber-athletes.” These individuals recruit most of their firm’s clients and manage its most important relationships. Certainly, they are part of teams that include junior professionals and administrative staff. But how fast a firm grows fundamentally depends on its number of such uber-athletes.
And when most people speak of a talent shortage in the industry, these are the kind of people that they are talking about. There are plenty of people to be had in the industry who can do only one or two functions (i.e., network, sell/close, process or service) very well. They just can’t do what uber-athletes do.
A handful of very sophisticated firms noticed this and have developed another alternative. They have reengineered how they recruit, add and service clients and, in the process, created substantial additional capacity.
More specifically, they have divided their businesses into sub-specialties and included both business development (or BD) staff and senior people whose sole role is to service clients as part of their teams. At the center of their model is still an uber-athlete, but this individual’s core responsibilities are to drive the firm’s broader marketing effort, manage its branding in their specialty, and manage their specialty-specific team.
They’re assisted by BD people—individuals who are phenomenal at networking or selling but lousy at working with clients—who allow the team to cover much more surface area than the uber-athlete could ever do on his or her own. These BD people have typically worked many years in the specialty segment the team is targeting. They’re supported in their efforts to onboard large volumes of clients by experienced staff members who love to service clients but, quite frankly, are terrified of making an outbound call.