Explosion of Firm Models Poses a Human Capital Challenge

One selling point of wealth management firms is that they eliminate the need for the client to shop around for multiple financial services providers. But the growth of financial planning firms and investment-only firms suggests that a substantial number of households are willing to do the legwork of coordinating services for themselves.

Financial therapy firms: Financial therapy is a relatively new field, in which advisors help clients to understand and transform their beliefs and “scripts” around money. The goal is to support those clients in moving from a scarcity mentality to an abundance mentality so that they may make better financial decisions for themselves and for their families. Financial therapy firms generally focus on the middle market, combining financial planning services and emotional therapy, and charge an hourly rate for their services. 

The fact that each of these models has taken root in the marketplace of advice means that advisors now have more potential career tracks, and more opportunities to specialize when it comes to giving advice. The key for advisors and firms alike is to align the advisor with the business model.

Is the candidate predisposed toward a more therapeutic type of client relationship? Another might have a more natural affinity for a technology-driven client relationship serving the mass-affluent. One candidate might be best suited to the comprehensive work of a wealth management firm, while another prefers to focus solely on tax planning or retirement-centric consumers.

There is ample room for career growth in each of the five service models described above. But there is also more opportunity than ever for advisors to leave one firm for another that might be a better fit for their talents, personality, career goals, and clients they want to serve. Thus, it’s important for firm leaders to clearly understand their business model, and to hire advisors who are a natural fit. 

Bear in mind that we remain in a period of soul-searching among employees who arose during the depths of the pandemic and “the Great Resignation.” Many advisors continue to reevaluate whether they’re in the right role and whether they’re truly professionally satisfied. They are well aware that they have more choices of firm models; in some cases, they’re contemplating building their own businesses around their strengths and interests. 

Retention is tied to an advisory firm’s culture and service model. If the fit isn’t right, then increasing salaries or bestowing new titles and responsibilities won’t create sustainable satisfaction. And bending your vision of the firm, even if it’s to accommodate a valued advisor, is likely to undermine the growth of the business over the long term. 

For now, “general financial advisor” is still a viable career track. But as upstart models become even more fully developed, specialization among advisors will become the norm. Firms won’t be able to simply hire advisors and plug them into their businesses as though the profession were homogenous. They will have to engage with candidates with the aim of understanding which services they truly want to provide.

Hiring an advisor without regard to whether they’re a good match for your model may work out in the short term. But ultimately, if firms are unable to accommodate advisors’ preferred type of work, they’ll have a hard time with retention. And that means they’ll have a hard time with growth.

How do advisory firms overcome these changes in the career and hiring landscapes? In today’s environment of rapidly evolving financial service business models, firms must know what type of firm they are really building to garner the best talent.

Angie Herbers is founder and chief executive of Herbers & Co. She brings two decades of experience to consulting, researching and training financial advisory firms to long-term, scalable growth.