Where in the world are the industry’s new financial advisors coming from?
From the pharmaceutical industry, from the shipping industry, from the garment industry — and lots more.
Career-changers with proven track records are financial services firms’ most sought-after FA candidates.
And they are sorely needed. The hunt for new advisors is imperative, as more and more older, veteran FAs retire from the business. On top of that, the number of existing advisors has shrunk as a result of the financial crisis, which forced thousands of new FAs and others with weak franchises to exit the business. What’s more, for a time after the crisis, wirehouses curtailed training programs.
And to be sure, the down market and Wall Street scandals caused the profession of financial advisor to lose some of its luster.
According to a study by researchers Cerulli Associates, in Boston, the number of FAs industry-wide dropped from 334,919 in 2004 to 320,378 in 2010. At wirehouses, the total fell from 60,960 to 50,742. Exacerbating the problem of short supply, the average FA’s age last year was 49.6; at wirehouses, 50.6, Cerulli says.
“The problem is that there’s a stagnant, aging pool of financial advisors,” says Mark Elzweig, whose executive recruitment firm, Mark Elzweig Company, is in New York City.
And the problem isn’t going away any time soon.
“The need for new advisors is critical. It’s about to get massively critical because more and more advisors are retiring,” says Bob Patrick, director of education and development at Raymond James, based in St. Petersburg, Fla. “We’re losing more advisors than we’re gaining and who are sticking after five or six years. If we don’t do something about this soon, we’ll extinguish ourselves.”
Thus, firms have gone full throttle in trying to replenish. They have devised new and creative ways to find potential candidates and are offering attractive incentives to secure the ideal recruits.
Not only is work experience a top priority, firms are zeroing in on career-changers —versus young college grads — because they are likely to have overcome a few of life’s hard knocks. Facing adversity, they believe, toughens them enough to deal with the challenges and frustrations of building a practice.
That, they reason, will likely reduce the ever-high rookie drop-out rate. The number of new advisors remaining with firms after three years is, at most, 15 percent, Elzweig says.
But finding the right candidates isn’t a snap. In addition to experience, trainees must be disciplined self-starters with an entrepreneurial spirit who are good at building relationships and a client base. Certainly not least: they need to have demonstrated sales success and possess a network of affluent contacts upon whom they can draw to prospect — right away.
“It’s a rare confluence of abilities,” Elzweig remarks. “But unless they have the raw sales skills, stamina and are driven to work very long hours, they will not be successful.”
That’s why firms are betting on career-changers who have already made their mark in other fields.
“Our commitment is to grow the number of advisors in the industry, not just ‘trade advisors’ with other firms,’ says Tom Fickinger, head of advisor growth and development at Merrill Lynch, in New York City. “The majority of [trainees] we’ve been hiring are new to the industry. Last year we hired the largest amount of trainees into our program ever. The biggest challenge is finding the appropriate people — the ones who have the highest probability of being successful.”
Merrill is in its second year of targeting career-changers to train for its U.S. Wealth Management arm. And it has headed straight to the Internet to find them, mounting display advertising and nabbing significant presence on LinkedIn, CareerBuilder and Monster job-finder sites. Moreover, it uses advanced targeting techniques to reach folks with experience in industries they know transition well to a career in financial advisory; for example, pharmaceutical sales.
Plus, to attract new people, last year Merrill ran more than 100 “career seminars” in its 120 complexes. It has also hired recruiters for each of its markets to help identify and source potential advisors.
Unlike the old days, there is less emphasis by firms today on taking their recruiting message to masses of college undergrads, unless they employ pinpoint marketing strategies.
As Patrick notes: “We’re mostly looking for career-changers who have had at least five to seven years’ work experience after college, have had to fight through some adversity and who have a network they can turn back to immediately” to prospect.
Raymond James, however, is seeking professionals in post-graduate programs who may be dissatisfied with their current jobs. Such students often have a local network ripe for prospecting.
And colleges offering accreditation toward wealth management is a prime source for Morgan Stanley Smith Barney.
“We spend a lot of time on those campuses,” says Barry Krouk, managing director and head of talent management. “We’re going where somebody has already declared their interest in certification in wealth management, or secondarily, wealth planning.”
MSSB also is big on employing social media to find new FAs. It networks through LinkedIn and other sites and has a robust online ad campaign, Krouk says. “We use social media both proactively — sourcing profiles — and reactively, where we join a chat or blog and participate, then look for referrals.”
Explains Krouk: “We’re looking for someone who has demonstrated success in a previous career and who understands the entrepreneurial spirit of what the FA role is. This is less about age and more about track record. It’s not hard-core sales we’re looking for but a person who’s been out prospecting and knows how to develop a client base.”
While it’s still notably challenging for firms to find Mr. or Ms. Right Candidate, interest in becoming a financial advisor has been picking up.