I have a client who faced an issue that will challenge more and more advisors: How to attract and retain high-quality professional talent, when you can’t afford to pay the high competitive compensation of the big firms? Our solution was a low-cost benefits and policies package that created the best possible work environment. Contrary to what you might have heard, most Next Gen professional advisors are not all about the Benjamins. Armed with a great job, at a reasonable salary, my client attracted the candidate he wanted–a CFP with three years in the business, and experience with clients. And by following through on everything he promised when he offered her the job, she started making a contribution almost right from the start, and after two years, all indications are she’s in for the long haul.
Competition for high-quality young professionals is at an all-time high, and by all indications, only going to increase in the coming years. Practice owners of all sizes have come to realize they can grow their practices faster and serve their clients better by adding talented young professionals. And recent studies by Moss Adams indicate that the economic value of an advisory firm skyrockets with the presence of junior professionals who can take the reigns and continue to grow a practice.
Yet recruiting and retaining the young talent you need to help you grow your practice and eventually fulfill a lucrative exit strategy doesn’t mean you have to win a bidding war. Just as the older generation of independent advisors almost unanimously left high-paying sales jobs to better serve clients in their own firms, Next Gen advisors tend to be more concerned about the quality of their jobs and the contribution they can make to their firms than their starting salaries. To attract them, and keep them on your team, you need to create a job offer and a working environment that communicates three things: That you’re serious, that you want them to be successful, and that you value the contribution they are making.
The first impression you and your firm make with prospective professional employees is your benefits package. As I’ve proved with my clients time and again, what you communicate with the benefits you offer is far more important than how rich the package is. The starting salary is really only important in as far you don’t appear to be trying to lowball the recruit. If you don’t have $1 billion under management, you don’t have to act like it. But you do have to be upfront about your situation, that you currently have X revenues, so you can only afford Y salary, but, (and this is a very big BUT), you expect your junior advisors to help grow those revenues, and as they do grow, so will their comp.
An excellent way to demonstrate that you intend to follow through on that promise is to include a bonus as part of the package. But don’t make the mistake of tying bonus comp to practice profitability. Young planners usually don’t have any control over profits. Even worse, every time you take a vacation as a “business trip” or buy a new computer you don’t really need, your employees will resent it. Bonuses based on revenues are much better for everyone. When you bring in more, everyone gets rewarded.
Next, a well-defined career track communicates that you’ve thought about their role in your firm, and how they can grow professionally as the firm grows. You don’t have to make promises or set dates in stone. But you do have be specific about your expectations: they’ll start doing this clearly defined job, and if they do it well, they can go into another specific job, and after some years, perhaps five, or seven, or whatever you want, if they prove they are partner material by demonstrating X,Y, and Z, then you’ll begin to sell them equity in the firm, etc. It wouldn’t hurt to be fairly clear about your exit strategy and their role in that, as well. Of course, all this can change with circumstances, but if it does, you’d better explain why, and exactly what the new plan is, or you’re going to have a very unhappy camper.
Then there’s the issue of relocation. It’s hard for me to believe that I even have to mention this, but it’s been my experience that sadly, I do. What does it communicate to a potential employee when you tell them that you’re looking for a high-quality, experienced, educated young advisor to help you grow, and hopefully one day take over ownership of your firm, but that you won’t pony up a couple of grand to relocate the right person should they be out of state? Exactly: that you aren’t serious.