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Why Some Advisory Firms Struggle With Recruiting

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What You Need to Know

  • To improve hiring practices, advisory firms should stop just-in-time recruiting, BNY Mellon Pershing's Christina Townsend says.
  • Firms should also groom talent from within and be open to candidates outside the sector with the right skills.
  • Firms should have open, honest conversations when it comes to diversity and inclusion, she also says.

As BNY Mellon Pershing’s annual three-day Insite conference starting June 8 approaches, one of the event’s scheduled speakers, Christina Townsend, offered some thoughts on three of the event’s key topics: human capital, diversity and advisory firm growth.

Townsend, the firm’s managing director and head of relationship management, consulting and platform strategy for advisor solutions, is to speak at the conference session “The Secret to (Virtual) Business Growth.”

The Need for a Human Capital Strategy

Some advisory firms continue to struggle with hiring and building their advisor talent pipelines. Those firms that are struggling “tend to be those who are not proactive at all about developing any sort of human capital strategy,” Townsend told ThinkAdvisor.

Even if a firm has just three people, it still “needs to have a strategy around how they’re going to attract, retain talent [and] deal with succession planning,” and it is “not necessarily difficult,” she said. However, it “does take time and effort.”

There are a few things that advisory firms “could tweak to have better results,” she noted.

Her first suggestion: “Don’t do what I call just-in-time recruiting. So don’t wait until you have someone who’s ready to retire, someone who’s leaving, and then start to recruit and try to find someone. You should always be recruiting, always be establishing that pipeline of potential talent to join your firm, just like you build a pipeline of prospective clients to come into your firm.”

Her second suggestion: Stop focusing so much on “chasing the experienced talent, those people who are advisors [and have] other roles within the firm [or] who have a perfect résumé, who’ve had all the experience [and] they check all the boxes.”

Instead, she encourages firms to “take the time to actually grow the talent within your firm [and] groom” new talent and “let them become your bench versus always necessarily thinking you need to go and hire someone with all of the experience from outside,” she said.

Similarly, firms should make sure to “create career paths” for the talent they already have so that when an advisor spot needs to be filled, the talent within the company is ready to step up to the plate, she explained. This “underscores the importance of really spending the time and investing in these people at your firm and creating that career path,” so they can become junior advisors, and then move on to be senior advisors, she said.

Firms should also be open to hiring people from different industries who have the underlying skills to make great advisors or to be exceptional in other roles, she said. “Don’t necessarily look at all the experience. Look at the person’s skills and think differently about who you hire.”

Townsend went on to recommend that firms “be open to recruiting across different geographies, noting that “the world has changed [and] there are firms that are becoming completely open to hiring the right person, regardless of location.” That has become easier now with more people working remotely.

Townsend conceded that this is “not necessarily the culture for every firm, but I would just say be open to it.”

Not planning a growth strategy for the firm right from the start is another mistake that many advisory firms make, she said. Some firms that are struggling have, over the past decade, “evolved from being maybe a one-, two-, three-person practice” to one with 20 to 50 people and “almost more of an enterprise,” she said. As a result of that evolution, the strategy around what they need to do to hire and retain talent has become very different, she explained.

Her recommendation: Always be thinking about what will be the next step in your firm’s growth.

“Hope isn’t a strategy,” she said, adding: “Hoping that you’ll have the person within your firm or hoping that the person will magically appear from the outside when you have this need … is not a strategy.”

On the flip side, those at firms that are making progress are clear when you ask them to articulate their business plans and strategies, she said.

Also important: “Culture and the values of a firm matter, and they matter more each and every day,” she said. “When we speak to firms, their people, their advisors want to be in a firm where they understand what the culture is [and] where the firm is going.”

The Need for More Diversity

Another major challenge for advisory firms pretty much across the board is the need for more diversity.

Noting that she serves as co-chair of her firm’s women’s initiative network, Townsend said she spends a lot of time focusing on minority hiring, diversity, inclusion, equity and belonging. Despite major strides being made, the sector still has a long way to go.

“I like to say that it’s not a surprise that we are where we are because we tend to hire people from our networks, from our circles — you tend to hire people who are like you,” Townsend said. “This starts really early on, like high school, college, you get an internship, maybe it’s your parents who help you find that, and it’s within their network and circle. And so it’s not totally a surprise that the financial services industry has been predominantly white males.”

But the industry has “made significant progress and there’s a lot of wonderful things that firms are doing” now, she said, adding: “I believe that … we’re going to start to see that show up in the statistics more and more.”

Firms can take a two-pronged approach to make improvements, she said. First, “you have to have an awareness that you may have some of these biases, or you may have a network that is predominantly white male,” she explained. “You have to have a kind of an awareness and an acceptance that this may have been where we’re coming from.”

Once you get past that, “you then have to kind of accept that it’s a business imperative to have more diversity in our workplace,” she said. After all, “it’s been proven time and time again that having more diversity will drive better business results.”

Another important factor, she explained, is that the types of clients that advisors serve are changing, “so you need to have awareness, you need to accept that this is something that you as a firm want to work on — and then you need to decide, how are you going to do that? What are you going to do differently? If you keep doing what you’ve done before, we’re not going to see the progress that we want. So what are you going to do differently in your approach?”

Firms that are able to attract great talent and improve diversity may have to start “redefining” their cultures to hang on to those advisors, she said, while other firms that already have wonderful cultures are challenged by finding the right talent. “So we spend a lot of time talking about internship programs, campus recruiting, [and] how to even remove bias from when you’re reviewing a résumé,” she said.

One thing that has been especially effective for BNY Mellon Pershing has been “what we refer to as courageous conversations, where we have very open dialogue about this topic of diversity and inclusion, what it means, how it will continue to benefit our company, our firm, our clients,” she went on to say.

“There’s a lot of things that I think people historically have maybe been afraid to say or ask on this topic for fear of saying or doing the wrong thing,” she said. But “opening up that dialogue around where we need to go and what challenges there are to get there has been extremely, extremely helpful.”

Tech and Referrals

There are “two other things that are on our radar” when it comes to challenges outside of human capital, Townsend said.

“The first is where we’re going with technology in financial services, and specifically within financial advisory firms,” she said. Before the pandemic, adoption of technology was the No. 1 topic, she recalled.

The pandemic, however, “forced us all [into] — and the industry as a whole did an amazing job — moving into a remote environment,” she said. “Lucky for us, our advisors, the clients they serve — they all adopted many, many digital tools that had been available, and now they’re using them and they can’t imagine going back.”

But the tech “challenge going forward is that we see other industries continuing to up the experience game, and we need to do the same,” she said. It is crucial to “ensure that financial advisors have the best tools and technology to serve their clients in the same type of effortless experience that they experienced in their lives elsewhere,” she explained.

She called that a “challenge and also a major opportunity,” adding: “We feel that the right thing to do is to always have experiences that are a perfect mix of people and technology. … Figuring out how technology can really drive … effortless experiences is where we need to go.”

The second challenge she pointed to was that many advisory firms are overly dependent on the referrals of their founders and senior partners, she said, adding that nearly half the audience at a recent summit said their primary source of growth over the next decade is going to be from referrals. The problem is “we know that at some point” those senior people at firms will retire, she said.

At the same time, only 13% said they were planning on having dedicated business development resources, so it is important that advisory firms “think beyond traditional referrals,” she added.

Pictured: Christina Townsend of BNY Mellon Pershing