The war for talent: How to attract, retain and align advisors in a changing world

The wealth management industry is changing quickly. Over the last 10 to 15 years, wealth management firms have experienced significant asset and revenue growth while having access to many qualified, talented associates to grow their businesses.

This is rapidly changing, however. Competition for assets and associates is increasing quickly, with larger firms and aggregators gobbling up both.

Raise the Jolly Roger

Private equity funding has helped finance the industry consolidation and increased budgets in competing for client assets and people. At the same time, the average age of advisors is climbing, and there has been a steep decline in new people entering the industry to replace them.

The impending wealth transfer from the boomers to the next generation results in a highly competitive landscape for both your client assets and your people. To quote a recent Mark Hurley paper, “Welcome to the Jungle,” the Jolly Roger flags are getting raised to pilfer your clients and people.

How to attract people

Your people are your most valuable resource, and this resource is becoming more scarce. Seasoned professionals are leaving the industry, and we are not replacing them at a fast enough pace. Laying out a strategic recruiting platform will become more important for firms if they want to grow.

Reaching young professionals: One area of change is that fewer young professionals are entering the profession, with fewer students studying finance. Additionally, the younger professionals that are joining no longer want the “Wolf of Wall Street” smile-and-dial career. Many are focused on helping people and making a difference. This is a major cultural shift for the industry that is changing the stereotypical broker/advisor persona.

Young professionals are also looking for more stability and flexibility, rather than strictly focusing on personal wealth accumulation. That said, compensation packages still need to become more creative. Adapting to this new cultural shift presents some great options to build a firm, with your more growth-minded associates leveraging the younger team members for support.

It’s more than just the money: For your highest-performing advisors, there is a shift happening at this level as well. Advisors have historically focused on getting the highest payout and maximizing their personal books. If you only focus on payouts, you will likely lose out to larger firms that can garner economies of scale and compete on higher payouts and a larger platform. 

However, the mindset is shifting as we move away from the wirehouse model to independent platforms. Advisors want the more flexible, independent models and the ability to help build enterprise value. This means a more team- or firm-based mantra, as opposed to individual books of business. Firms need to think strategically about how to provide an attractive advisor alignment program, allowing for degrees of freedom while tying back to the firm’s foundation.

Advisor alignment can come in many ways, shapes and forms. For example, some advisors may want autonomy but just have back-office support to run their business. Incentives here may revolve around payouts and growth/profit sharing to take part in overall growth.

Getting creative with compensation: For those that you want to bring to the next level, firms are using many different vehicles to align interests, from buying minority revenue interests to buying majority ownership of the advisor’s book to bring them under the firm completely. Each option has varying degrees of equity and profit participation to appropriately align the advisor to the enterprise.

Whether younger staff or seasoned advisors, firms must be more creative and competitive when looking at compensation and career paths. The pathway to partnership should be defined and communicated so there is alignment at all levels. Clearly defining your mission and values will also help differentiate you from your peers and attract like-minded people to the firm. A few firms are ahead in leading this cultural shift and are seeing both inorganic growth with firms wanting to join, as well as organic growth in attracting younger professionals.

How to retain people

Attracting new people to your firm is a major hurdle but keeping them is a challenge as well. Retaining your top talent has become more difficult as it is much more challenging to find these people. Aligning interests and incentives is a scorching hot topic now.

Industry leaders are going beyond the usual compensation and incentives package of base, plus bonus, with potential profit sharing. To align with long-term enterprise value, firms are getting more creative with pathways to partnership and equity/equity-like packages. This creates clear career and compensation opportunities for your team and aligns everyone around the firm’s value and not just their individual contributions.

Creating new career paths

Career development and training opportunities should also be incorporated into the career path. Providing a holistic approach creates a stronger culture of delivering client value and experience as everyone is working towards the same goals to help clients and in turn, deliver long-term viability to the firm.

Looking deeper, it is not just about the compensation. Aligning firm values with individual values will be key as well. As the industry matures into “mega firms” and “everyone else,” finding a niche that aligns with the clients, firm and staff will be key. This can be around things like service to your local community, advanced technology, helping a specific group of people (athletes or veterans, for example) or a niche asset management strategy.

No matter the mission and values, if you can create a culture of “us versus them,” clients and associates will be much more loyal than to firms that do not have an identity. 

How Wipfli can help

The race for clients and people has already begun. If you are not thinking strategically about how you are going to organically grow and retain your clients as well as your team, be ready to see the Jolly Roger on the horizon. 

Having a clearly thought-out strategy on how to attract, retain and align your team will be key to your future viability and resiliency in the coming market cycle, and Wipfli’s experienced team of industry professionals can help you create a plan to navigate these challenging waters. Contact us today and see how we can advise your strategic personnel planning.