For wealth management firms looking to fill an advisory or executive position this year the facts are sobering, if not daunting.

The average age of a financial advisor is nearly 60 years old and over one-third of financial advisors are expected to retire within the next 10 years, according to a recent study by Cerulli Associates. 

Approximately 15 per cent of wirehouse advisors and 7 per cent of independent advisors are at risk of leaving their jobs in the next two years, the JD Power US Financial Advisor Satisfaction Study found. Right now, advisory firms have an average of three open positions, an Ameriprise Financial survey revealed.

“Demand for talent is the most intense I’ve ever seen,” said executive recruiter Mark Elzweig, whose career spans more than 30 years. “Even in a down market, nobody is pulling back on recruiting deals.”

In the previous decade, three or four advisory firms may have been vying for the services of a job candidate, according to recruiter Louis Diamond, president of Diamond Consultants. Today that number is often 20 or more, he said.

The labor market for experienced wealth managers is tight across the country, executive recruiters report, but particularly cutthroat in Florida, Texas and the Southwest. 

So how can advisory firms compete?

Some of the answers are obvious: they have to pay up, offer attractive benefits and, in many cases, equity or a clear pathway to becoming a stakeholder. Other factors have become increasingly important: work/life balance, flexible hours and hybrid work locations, job satisfaction within a nurturing corporate culture, a well-defined path for career advancement and a workplace that is diverse and inclusive.

Compensation as a starting point
Any conversation about talent and recruiting has to start with compensation, especially in a business that revolves around money. Wealth managers may think that they’re paying employees a lot, but a recent survey by Arizent found that 28 per cent of staffers cited low compensation as the primary reason why they left their jobs.

Base salaries for advisors at RIAs have jumped 15 per cent to 20 per cent over the past three years, wealth management executives told Family Wealth Report. Wirehouses are offering advisors upfront bonuses of 150 per cent to 175 per cent of their gross production, said Elzweig, provided they sign long-term employment contracts varying from seven to 10 years.

Family offices trying to fill new positions are experiencing “sticker shock,” said compensation consultant Trish Botoff. Nearly half of family offices surveyed by Botoff Consulting reported paying higher bonuses for executives last year and higher salary increases this year. And eight out of 10 family offices reported paying higher salary increases to staff in 2022.

Executives at nearly one quarter of single family offices surveyed by Botoff for the Morgan Stanley SFO Compensation Report received salary increases between 6 per cent and 10 per cent or more last year, while 61 per cent of staffers got raises between 3 per cent and 6 per cent in 2021.

The median total direct compensation for CEOs at all single family offices was $800,500, while chief executives at SFOs with more than $2.5 billion in assets pulled down a cool $2 million. Median total direct compensation was over $900,000 for chief investment officers at all single family offices; COOs received $416,000; portfolio managers received $360,000 and relationship managers $232,500.
 

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What else is needed?
Wealth management firms are also sweetening the pot for benefits, bonuses, performance incentives and profit sharing plans.

And equity is becoming table stakes to attract top talent.

“Firms who want the best candidates have to offer ownership,” said industry consultant Jamie McLaughlin. “That’s been the big change. Field studies have shown that equity is a cultural determinant at high performing firms.”

Family offices are increasingly offering long-term incentive compensation and co-investing opportunities with lines of credit as recruiting and retention tools, according to executive recruiter Linda Mack.

“It’s an extraordinarily competitive market, and family offices are bidding up their offers,” Mack said.

Just over half of all single family offices are using long-term incentive, or LTI, compensation vehicles, as do more than 80 per cent of SFOs with $5 billion or more in assets, according to the Morgan Stanley report.

Deferred incentive compensation, based on longer-term performance which is vested over time and paid out in the future, is by far the most popular LTI plan used by family offices. 

Co-investment opportunities that allow executives to invest with the family through loans, some of which don’t have to be repaid, are also popular, as are carried interest plans, which provide executives with a share of investment profits in excess of a specified return, typically in direct and alternative investments such as private equity or real estate.

Beyond the money
While compensation is the starting point for recruiting talent, wealth management firms say job candidates ask the most questions about career progression, company culture and job satisfaction.

“Wealth management talent knows they’ll be paid well,” said Grant Rawdin, president of Wescott Financial Advisory Group in Philadelphia. “What they’re really interested in is career satisfaction. We make sure to have candidates talk to people at the firm who have been on the same career path.”

Job candidates at Pitcairn, “ask way more about work-life balance than cash compensation,” said Andrew Busser, president of the family office in suburban Philadelphia. “Employees also want to see that the firm is investing in them and their career development. We’ve set up an apprenticeship model which is augmented by more formal training.”

WE Family Offices has a B Corp Certification, meaning that it has to demonstrate high social and environmental performance as well as accountability, and transparency in areas including corporate governance, employee benefits and charitable giving.

That designation is a signal to wealth managers that WE “thinks about talent differently,” and helps attract NextGen advisors in their 20s and 30s to the firm, said Michael Zeuner, WE managing principal.

“Successful talent management in this environment takes process, management and dedicated resources,” Zeuner said. “This stretches from recruiting, to onboarding to ongoing career management.” One of WE’s partners, he added, has been designated to oversee career development throughout the firm.

 

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Time for diversity
Wealth management firms are also reporting a huge surge of interest in diversity and inclusion, both from employers seeking to hire more women and people of color and job candidates who don’t want to be in homogenous environments.

While recruiting success for people of color remains low, it hasn’t been for lack of effort. The latest industry initiative is being undertaken by the UHNW Institute, which has formed a Diversity, Equity and Inclusion Council headed by Carol Schleif, deputy chief investment officer for BMO Family Office in Minneapolis.

“It’s been hard for the industry getting diverse candidates,” said Schleif. “Entry level isn’t easy, but finding mid and senior level candidates is especially challenging.”

The Council plans to start an employee resources and networking group, initiate training and leadership development projects and produce best practices content for the industry.

To attract diverse candidates, Schleif suggests “hiring recruiters who look like the people you’re trying to recruit” and establish relationships with HBCU schools (Historically Black Colleges and Universities). Firms that are reviewing candidates for open positions can “neutralize” résumés, she added, taking off names, names of schools and addresses, to minimize the inherent biases of executives making hiring decisions.

Emphasizing a wealth management firm’s commitment to social causes and “stewardship capital,” a conviction that the firm is about more than just making money, is another way to attract diverse – and younger – candidates, Schleif said. Examples include supporting women who may need to travel out of state to get an abortion, having a carbon neutral footprint and supporting financial education for lower-income communities in the firm’s market.

Casting a wide net
What about the entire talent marketplace? How should firms be recruiting?

Executives say they use a combination of outside recruiting firms, internal human resources, referral networks, LinkedIn and other social media and job postings on industry sites such as the CFP Board.

Companies shouldn’t recruit only when they have job openings. “Firms constantly have to be looking,” McLaughlin said. “Having an active presence in the market is the best way to find the best candidates.”

Ideal candidate
And what are wealth management firms looking for?

Ideally, an experienced advisor with a CFP, excellent relationship skills and a substantial client roster. Having a niche helps, said recruiter Louis Diamond, either with a “unique subset of clients, such as professional athletes” or as a subject matter expert in a specialized field such as complex estate planning.

Most of all, firms are looking for advisors with “an upward trajectory,” said recruiter Mark Elzweig. “They’re looking to hire growth stocks.”