Tough times like these can also be the best time for well-positioned advisory firms to grow. With the fate of many wirehouses uncertain, and the markets falling, if the past is any indication, new clients will be turning to independent advisors to get a better handle on their personal finances.
To deal with these new clients, or just to better position their practices for growth, some advisors will be looking to hire a young financial planner or two to help them. The good news is that their timing couldn’t be better: with many advisory firms wrestling with declining revenues and consequently curtailing their own hiring plans, the market for young professional talent is very good right now. But be careful–there are just as many pitfalls today as there are during the boom times.
Because there are suddenly so many good young advisors available now, one of the mistakes I see firm owners making is acting too quickly. They often feel that they have to jump at the chance to hire a great candidate before someone else does. But hiring too soon during down markets can be just as big a mistake as hiring too late times are good. With markets down, and revenues depressed, an untimely hit to cash flow, especially one as big as a new professional in a relatively small firm, can really strain a firm’s finances.
What’s more, because they are presented with so many high-quality candidates today, advisor/owners tend to hire way more talent than they currently need. Of course that can be a great investment for the future–if you can afford it. But even the best firms have to exercise some fiscal restraint during down times, at least until the flood of new clients starts to generate some significant cash flow.
So, in your zeal to take advantage of the opportunities presented by these tough markets, be careful not to dig too deep a hole. Better to hold off hiring until you can see the need growing, and then hire a young professional who can hit the ground running and make an immediate impact on your firm.