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Mission: Train Future Independents

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Independent advisor Pamela Rigsby in Raleigh, N.C., was talking about the 24-year-old FA trainee she hired 18 months ago:

“I tell clients she’s a taller, thinner, younger, smarter me!” says Rigsby, 46, jovially. “She’s knocking it flat-out [of the park]. She’s doing the numbers. Headhunters call her all the time.”

Rigsby, whose broker-dealer is Raymond James Financial Services, is one of a ripple of independents who are hiring FA trainees to help them with their workload. Beyond that, these advisors are finding that employing trainees is an ideal route to expanding their practices.

“There’s great value in having a junior team member start out with your perspective on customer service rather than add an experienced advisor who needs to unlearn bad habits they’ve picked up elsewhere,” says Scott Bennett, founder and president of the BD, Nations Financial Group, based in Cedar Rapids, Iowa.

The industry’s acute advisor shortage is hardly a secret. Wirehouses have beefed up training, but they’re looking for career-changers—even high-achieving attorneys and CPAs. For independents, this leaves a ready-made pool of younger, eager-to-learn men and women who can be trained from scratch to help grow their practices.

“There are two main advantages to hiring trainees. First, if they’re good at building their book, the return on the firm’s training investment is great,” says financial advisor Craig Watanabe, COO of Penniall & Associates, in Pasadena, Calif. “Secondly, trainees don’t come with baggage or bad habits that need to be broken.” Watanabe has hired a number of FA trainees, two in the last year.

But largely because of the expense required, most independents shy away from advisor training. Historically, such FAs have benefited from wirehouse training programs, whose bills were footed by these large firms.

“The independent business grew up over the last 20 or so years on the coattails of FAs that were trained at large firms. They took all the risk. The independents have been given a free ride,” says Craig Gordon, director of RBC Correspondent Services, in Minneapolis. “But now, independent firms are going to have to develop the next generation of advisors that can connect with a new generation of clients.”

Some BDs and clearing firms are helping by making available training programs on which they are paying some or even the bulk of the tab. For example, Raymond James’s Advisor Mastery Program, begun two years ago, helps its independents—as well as the firm’s employee advisors—address succession planning and aims to attract more women to the profession. First Clearing’s New Advisor Training Program, at costs of either $3,000 or $3,500, includes self-study and training at the firm’s St. Louis headquarters. This year, RBC Correspondent Services kicked off its Associate Financial Advisor Training Program for clients. For either $1,000 or $2,000, the clearing company provides comprehensive menus, including sales skills training at the Minneapolis home office.

Most independents pay trainees a salary plus, as they develop, a bonus or percentage of commissions.

Before hiring, principals determine the specific role the trainee will play; for instance, handling hard-core financial planning. Or a trainee might be taken on to prospect; the mission is to open doors and concentrate on business development.

“Then the experienced advisor comes in and closes the business,” says Michael Silver, a coach and senior managing partner of Focus Partners in Paramus, N.J. “In many cases, half the time trainees are pounding the pavement; the rest of the time, they’re helping to manage the practice and servicing clients.”

Potential trainees can be found through local universities—particularly those with programs preparing students to earn the certified financial planner (CFP) designation—or by advertising for them. Given today’s pervasive Internet culture, online is the go-to place, more popular by far with young job-hunters than poring over newspaper ads.

Karen Ramsey, an RIA in Seattle, found the right advisor trainee by advertising on The woman, who had previously worked as a bond portfolio manager, was seeking the required work experience to finish her CFP. For Ramsey, whose practice included one other FA, it was a perfect match.

“I wanted someone who had enough under their belt in coursework to be a CFP but who was still malleable in terms of understanding the kind of client service that is my standard,” Ramsey says. She immediately placed the newbie in charge of maintaining bond ladders and researching mutual funds, thus freeing Ramsey to focus, increasingly, on running the practice and servicing clients. Four years later, the ex-trainee is a Ramsey & Associates financial planner.

Many independents are reluctant to train FAs because they consider the expense a decrease in their paycheck. Wrong view, says Bennett, whose Nations Financial clears through First Clearing and sometimes bears partial advisor cost for the latter firm’s training program.

“The first step is not to think of your practice as a commission book. It’s not a book—it’s a business. That confusion prohibits a lot of independent advisors from spending money that could really help them build their practice,” Bennett says.

He continues. “Everybody wins if you have the courage to give away enough client revenue at the bottom of your book to allow a trainee to survive financially, provide them with a tool set and mentor them to generate their own revenue while you’re using your extra time to further relationships with your best clients.”

Seeking Successors

Succession planning is often the driving force behind an independent’s decision to spend the time and money to take on a trainee.

At Pam Rigsby’s practice, trainee Kelsey Dougherty, 24, routinely tells recruiters “Not interested!’” says Rigsby. “She understands that she’s here for the long haul.” Rigsby hired her fresh out of college after two summers of interning with the CPA.

Participating in the Advisor Mastery Program, Rigsby pays “only a small percentage” of the expense. “Raymond James assumes the lion’s share,” she says. Dougherty attends most client meetings, and Rigsby mentors her extensively. “I teach her the way we do things.”

Recently, after a prospect who was retiring at age 58 came in with a large rollover, Rigsby prompted Dougherty: “What type of strategy does he need? What is the research that’s necessary?” She continues: “And I took her with me to see the retiree’s estate attorney. I really get her involved. I’ve certainly had plenty of opportunities over the years to partner with people who already have a book. But they didn’t want to take the holistic approach, and sometimes their personality got in the way.”

Ramsey, who has used Craigslist to also hire paraplanners, spends lots of time interviewing stand-out FA candidates who respond to her ads.

“You have to look at background and skills but almost as importantly, how they’re going to fit in with your culture,” she says. “I’ve interviewed people with a brilliant skill set, but either they’re too flighty or so serious that they have a spreadsheet for everything but no people skills. They wouldn’t fit in here at all.”

Generally, trainees are expected to raise assets, but the Do Not Call registry has of course made cold calling more difficult than ever.

“In many cases, trainees are working their parents’ address books—unappealing, but a natural market,” says Scott Smith, a director of the Boston-based research firm Cerulli Associates.

Training someone to become an FA—and, hopefully, not a wash-out—is a major step that indeed requires the dedication of both parties.

“Without good mentors, hiring trainees is not likely to be fruitful,” Watanabe opines. “Only a minority of trainees will become successful financial advisors. So it’s a numbers game: A firm will go through quite a few trainees in search of the few who are worthwhile.”

However, executive recruiter Mark Elzweig, whose eponymous company is in New York City, stresses: “Since the advisor population is aging and shrinking, at some point independent firms have to find a way to train new advisors themselves. They can’t be solely reliant upon recruiting from the pool of wirehouse-trained advisors—it just isn’t big enough to go around.”

Further, since many of those career-changers that wirehouses are keen on hiring are already in their 50s, it won’t be long before they’ll be exiting the business too.

This creates a huge opportunity for younger trainees, including and especially women, to join independents.

“The female advisor adds a dimension to a practice that’s extremely powerful. A truly knowledgeable woman advisor has a big advantage over their male counterpart,” Bennett says.

Bottom line: Hiring trainees is a practical, potent way for independents to boost revenue and grow their business. At the same time, trainees get the clear advantage of apprenticing with real pros.

“In the independent space, new advisors obtain [in-depth] hands-on training. At a wirehouse, many times they’re left to go it alone,” Silver notes. “At an independent, they’re learning operations, administration, portfolio management, business development. They’re being mentored and learning every aspect of the business—and that’s great.”


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