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March 22, 2021 at 03:06 PM
What You Need to Know
- There may be a surge in recruiting in the next two quarters.
- Firms would be wise to keep current successful advisors happy.
- It costs more to replace an advisor than to keep current staff satisfied.
Almost everyone has heard the statistic that it’s five times more expensive to gain a new customer than to keep a current one. Whether that calculation is 100% accurate may be debatable, but it speaks to a larger truth: Customer retention is crucial for any successful business.
This is a critical point for everyone in our industry to remember, because we could see a recruiting surge at some point over the next two quarters. Due to the pandemic, financial professional movement slowed in 2020, especially in the first part of the year.
But as vaccines continue to be distributed more widely, the expectation is that the economy will bounce back with force this year, which should jump-start recruiting activity.
Winning Formula
Ahead of the coming recruiting shakeout, firms must understand that retention and recruiting are inextricably linked. Indeed, the best way to keep advisors starts at the beginning, by recruiting the right ones in the first place — and that comes from a firm having an appreciation of their strengths and weaknesses.
For example, in today’s world, most boutique firms will tout their unique culture or access to the leadership team. And while these things are — and should be — important to advisors, they are no longer differentiators.
The more critical consideration for firms is whether they can provide advisors everything they need based on their business model. In other words, which type of financial professionals are they equipped to serve well and, just as important, which ones are they not?
Coming to terms with these questions in the months ahead will help determine who “wins” the upcoming recruiting battles, because it’s not about how much headcount or assets firms gather during this time. Instead, it will be about how many of those advisors are still in the same place five, 10 or 15 years from now.
Two-Way Street
Notions of “fit” are, of course, a two-way street. If advisor attrition costs firms money, the stakes are even higher for the financial professionals themselves, many of whom cannot afford to suffer the type of client exodus that often accompanies a poor transition decision.
