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In Practice May 5, 2008
Firms Increase Recruiting Efforts for New Advisers
The increased competition for top talent among broker/dealer firms has caused many firms to step up the recruiting initiative, according the latest Cerulli report.
Reported by Ellie Behling
In response to the competition, B/D firms are restructuring their models to include more than monetary incentives, says The Cerulli Edge—Advisor Edition Recruiting Issue. The report notes a trend toward matching the needs of an adviser’s practice with resources of the firm.
At large wirehouses, monetary “transition assistance” packages of forgivable loans are common, reaching as high as 260% of one year’s gross revenue. If the adviser stays long enough, the loan is forgiven. Recently these packages have been offered to more advisers than before, including third- and fourth-quintile advisers.
In addition to the classic extension of these packages, more practice management tools have also been implemented, the report finds. For instance, firms might offer a seminar program or investment in technology that is attractive to advisers. Technology is becoming more important to advisers as a tool to running a more profitable and efficient business.
Cerulli says that retention issues might be “felt most acutely in the wirehouses.” Existing advisers at the firm can feel resentful toward the new, experienced advisers entering the firm after accepting a hefty transition package.
While the report notes the need for firms to continue to recruit for topnotch advisers, it also points out that some industry observers question whether firms can remain profitable when doling out so much in order to recruit.
A Referral Business
Referrals are also the most common way advisers build their staff, says Cerulli, noting that it is also the most common way advisers build their clients. The majority of advisers (63%) use family friends and personal contacts to recruit new advisers to their practice. The next most common source is public posting, such as newspapers or job search engines (39%), followed closely by college campuses and new graduates (37%), recruiting service (32%), and client contacts (26%).
Overall, Cerulli says the industry must begin to think more creatively about the development of career paths for new advisers as many continue to retire (See Recruiting Young Advisers Requires Less Traditional Approach).