Close Close

Financial Planning > College Planning

How Advisors Can Profit From the Talent Shortage

Your article was successfully shared with the contacts you provided.

Like many colleges and university programs around the country, it is at times difficult to get students to enter a particular degree program. It’s a tough job because you have to convince a group of “kids” that they should commit to a specific educational track. Research shows that a high percentage of incoming freshmen are undecided on their major, and even more change majors during college. In addition, how many of you actually work within the degree you received?

My alma mater, Kansas State University, has the same problem within their CFP-registered university program. Over the years, we’ve seen the program go through highs and lows in the number of students entering its financial planning program. K State determined that it costs the school about $2,000 a year for each student in the program to get a degree in financial planning. As a result, the goal is to give students (who don’t yet know what they want to do) an incentive to join the CFP-registered program to help them make up their minds. To increase their enrollment forecast, Kansas State decided to solve an industry problem — the talent shortage.

While this is just a small step, we believe the financial planning community could also come together to solve the talent shortage on a much larger scale: If every planning firm in the country would sponsor one scholarship of only $2,000 at one of the many financial planning programs, every year, we would more than solve the talent shortage.

This isn’t just charity. We consider it to be enlightened self-interest. The talent shortage is real, with tangible effects on the financial planning industry. To grow, most financial planning firms need to add more financial planners. Yet the demand for young planners is driving up their gross margins.

Low Supply, High Demand Pushes Comp Up

Data from our ongoing Kaleido Scope business assessment for advisory firms shows that employee recruitment is one of the top three issues in the industry. The supply of new associates is so low that the demand is driving compensation up to astronomical levels. We know that compensation for associate advisors and lead advisors has increased over 20% during this past year alone. This is creating quite a dilemma for smaller advisory firms with limited resources to invest in new financial planners.

However, the issue isn’t just isolated to small firms with smaller budgets. We are seeing the effect on large firms to be just as harmful. While the large firms are able to pay the high compensation, they are unable to meet the client demand for their services. The result: overworked lead advisors. In the past, we’ve seen client-to-advisor ratios hovering around 85 clients to one advisor. Today, we are seeing those ratios rise to above 120 clients per advisor. The result is falling service levels.

When a service-focused business, such as an independent advisory firm, has the combination of rising operating costs (due to a shortage of talent and increased compensation for that talent) plus falling service levels, we end up with a storm of issues that change profitability, including falling referral ratios from clients.

Of course, the other side to that coin is that it’s creating an opportunity for financial planning schools (like K-State) and for young financial planners who are graduating from those schools, or who are currently employed at advisory firms but have become unhappy with their particular situations.

In fact, this is the best time we’ve ever seen for younger planners to change jobs: from a career standpoint, it’s fabulous. For those who own firms, it’s painful, sometimes even deadly.

If You’re an Employee …

Let’s start with the situation faced by employees of advisory firms.

I believe every lead advisor and associate advisor who isn’t happy should be looking for a job right now. Each advisor working in a firm today has negotiating power. Firms are growing faster than ever with falling profit margins. There are few advisory firms that will give up their growth in favor of their margins. What that means is that they will pay big bucks for really great talent.

Here’s how to find a new job:

• If you are not working directly with clients already, look within your own firm first. Chances are that like every other advisory firm, your firm needs additional financial planners to meet its growth goals. To do so, most firms need new advisors who can work with new clients.

If that’s your goal, the easiest way to get a job you like is with your existing firm: by convincing the owner that you are ready to work with clients. To do that, most advisors need to improve and demonstrate their people skills, which means learning to be better listeners. A good rule of thumb is to talk only when it’s necessary to keep the conversation going, or to clarify the other person’s point.

Then, learn to ask the right questions. The best communicators don’t do a lot of talking: They do a lot of listening. And for an owner-advisor to trust you with their firm’s clients, you need to demonstrate your ability to communicate well.

• If you are already working with clients in your firm but are not happy, make a list of the things you want in a new job. If you decide you don’t want to stay at your current firm, you have a big advantage in today’s job market: your experience, and your education if you have graduated from a CFP-registered program.

Not only does that pedigree give you a leg up on job applicants without experience, you also have a much better idea of what you want — and don’t want — in a new job.

So take some time, and consider what you’ve learned, what you’d like to do differently next time around and what you need in a job to be challenged, motivated and happy.

• Start actively posting your resume on both industry and non-industry job sites. Thanks to the Internet, it’s easier to look for a new job today than any time in history. Within the advisory industry, there are association sites, and broker-dealer and custodian sites. However, in my experience the general job sites — Career Builder, Indeed, Craigslist, Monster, Yahoo and LinkedIn — are producing the best results in job placements.

• Start doing interviews. In today’s advisory job market you should start getting a lot of interviews pretty quickly. If you’re not, there is something wrong with your resume.

• Fix your resume. Here’s how we recommend that you put yourself in the best possible light:

  1. Find a professional to write it for you. I’ve found that most people have a very hard time writing about themselves. Resumes are designed to take all your best strengths and highlight them in one page.
  2. Use numbers when they are to your advantage. People respond to numbers since they are easy to understand. Years on the job, and numbers of clients, cases, portfolios or financial plans you’ve worked on — all are concrete reasons that the reader should be impressed.
  3. Have a good photo. This is easy, but first impressions are also important. Have a pro do it — this is not the place for an iPhone photo — and dress appropriately: It couldn’t hurt to check out some other resume photos to see what people are wearing and what you think would look best on you.
  4. Don’t hesitate to recount your experiences in detail. People may recognize your job description or title, but that doesn’t mean they really understand what you did in a prior job. So tell them: not in painful detail, but clearly enough that they understand the depth of your experience. This is especially important when it comes to client contact. You may not have been a lead advisor, but if you sat in client meetings or talked with clients about their financial plans or portfolios or helped solve their problems, it will help prospective employers better understand your people and communication skills and experience.

• Once you’ve fixed your resume, don’t be afraid to use visual aids in the interview. Don’t be shy about including documents, brochures, reports, articles, etc., that showcase your accomplishments. It’s one thing for people to read about the things you’ve done; it’s quite another to actually see them.

• Negotiate compensation. Once you get a solid job offer, or three, it’s time to tell your employer so they are given the opportunity to match the offers. We’re seeing ridiculous comp packaging these days. For instance, industry recruiters won’t even work in the San Francisco Bay area: The pay is just too high in that market. Associate advisor jobs are paying upwards of $95,000 a year, comp and benefits — with no experience! (The nationwide average is about $60,000.)

If You’re an Advisor Employer …

The talent shortage in the advisory world is very real. While employees will benefit from it, employers should be very concerned. But there are steps you can take, too. For one thing, most employees don’t want to change jobs. And those who do usually give their employers plenty of opportunities to change their minds about leaving.

We find that the key to keeping and attracting employees is simple: Make a pitchbook. A pitchbook is simply an expression of your culture and your values. It outlines what you are as a company and what you stand for. The pitchbook should include four parts:

1. Define your culture. Create and illustrate a culture that makes employees feel part of something important and lets them know their contributions are important to the firm’s mission and success. Show them that you take their job seriously by outlining their training process, their career track and the tools you’ll provide so they can do a good job.

2. Define your client service models. Employees today want to know how you want the client service delivered. In our white paper, “X-Cell: The New Frontier of Client Service,” we outline a process for doing this. Not only will this help you attract people to your organization, but it will also help you solve a growing profitability problem.

3. Define your incentive structure. Over seven years ago, we conducted an industrywide survey that illustrated why revenue-based bonuses are the most effective way to get your financial advisors motivated to contribute to the bottom line. Your pitchbook should illustrate how the combination of a base salary and incentive program works in your firm. Financial advisory firm employees are going to negotiate for the best prices, and we recommend they do. But when you have a pre-set incentive program that outlines exactly how an employee grows in your firm, and if it is created properly, the negotiation of compensation can nearly be eliminated while shielding your firm from out-of-control rising comp rates.

Additionally, it will protect your firm from financial advisory employees who are just working for the money.

4. Illustrate your benefits package. There is no reason any advisory firm should not have a top-notch benefits package. There are professional employer organizations (PEOs) all over the country that provide these packages to advisory firms for little cost, compared to what you lose if you don’t have them.

In short, create a firm that makes people want to be a part of it. It’s really not that hard to do, if you put more effort into making it happen.

At this time in the industry, firm owners really don’t have a choice. And don’t forget to sponsor a financial planning student or two to restore some sanity into the advisory job market.

— Check out You’re the Owner, So Own Up on ThinkAdvisor.


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.