Jon Yankee suddenly found himself in a hiring crunch last month.
One new financial planning graduate who had accepted an associate adviser position with his firm, FJY Financial, abruptly backed out, and later that week, a midlevel adviser notified the small, 11-person firm that she wasn't returning from maternity leave.
"Three weeks ago, we weren't even hiring and now we have two positions to fill," said Mr. Yankee, a partner at the Reston, Va.-based firm with about $455 million in client assets. "The timing is terrible, not a whole lot of people are job hunting in early summer."
Like other frustrated advisory firm owners, he knows it could be months before the vacancies are filled, given that the role of financial adviser is the second most difficult in the nation to hire for, right behind health services workers, according to an analysis by DHI Hiring.
It takes an average of 48 working days, nearly 10 weeks, to fill an open financial services position, according to DHI. That average has climbed steadily each year since 2009, when it took about five weeks, the analysis found.
By 2022, the industry is expected to face a shortfall of at least 200,000 advisers, according to consulting firm Moss Adams.
The industry has long known it will face a shortage of advisers based on the fact that the average age of advisers is over 50 and 41% of advisers are 55 or older, Cerulli research found. But there are additional factors at work, experts said.
"There's a capacity issue," said David Canter, head of the RIA segment for Fidelity Clearing & Custody Solutions.
He and others cite multiple reasons that the supply of skilled financial advisers is low, starting with a cutback in training programs at wirehouses generating fewer professionals and too small a pool of new graduates earning financial planning degrees. Additionally, competition for planning talent is increasingly coming from new sources, including large firms like Vanguard Group.
COMPETITION FROM ROBOS
The investing giant is constantly hiring advisers to man its $52 billion hybrid robo-adviser, as are other robo-advisers that are adding live financial advice for clients, including Betterment and Schwab Intelligent Advisory.
The dearth of advisers has been an issue for years, but the impact is being felt in new ways, Mr. Canter said. For example, firms are now acquiring advisers, in lieu of hiring them.
"More and more we're seeing firms doing acquisitions where the deals are about gaining the talent, even more so than the clients," he said.
Neal Simon, CEO of Bronfman E.L. Rothschild, said the firm's purchase of TriCapital Advisors, a firm with $185 million in assets, in January was aimed in part at bringing new professionals into its Rockville, Md., headquarters.
"That was largely about bringing on those three professionals who added to the depth of talent we have as a firm," Mr. Simon said.
Bronfman E.L. Rothschild, which has about $4.5 billion in assets under management and 85 employees, is interested in taking on additional advisers with as little as $50 million in assets if they share the firm's "clients-first" mantra and can fit in to one of its nine offices, he said.
With the labor statistics as they are, advisory firms need a new approach to hiring, experts said.
"Firms need to take more ownership in the process," said George Tamer, managing director for strategic relationships for TD Ameritrade Institutional. If owners just send a recruiter a job description, they're likely to find the slate of candidates they end up with doesn't match up well with the type of person they're seeking, he said.
Firms need to think about the personality and skills needed for different positions, such as searching for candidates with a passion for people to fill client-service roles.
They also need to make sure their hiring process includes showing off the many reasons someone would want to join their firm, including illustrating a career path. This is especially necessary when they're interviewing millennials, currently the largest generation in the workforce, Mr. Tamer said.
"Sometimes the adviser has the mindset of focusing just on finding the best talent, when they also need to be more aggressive about selling the firm to the prospective employees," he said.
Advisory firms also should have an inventory of prospective talent.
Barry Papa, the head of Raymond James' recruiting arm, Advisor Choice Consulting, said in most good-sized markets, a firm should be talking regularly with about a dozen people it might be interested in hiring in the future.
The firm should understand the needs of the prospective candidates and what kind of advancement they're looking for within the industry.
"Nobody wants to move laterally," Mr. Papa said. "Advisers want to try and improve their situation."
Ten-year-old advisory firm Yeske Buie has integrated a long-term approach for hiring young advisers that's based on a book on C-suite hiring by Geoff Smart and Randy Street, "Who: The A Method for Hiring" (Ballantine Books, 2008).
"We have come to realize that recruiting for new talent is just an ongoing process, it's always happening," said Lauren Grove, a financial planner at the 14-employee firm.
Yeske Buie is in regular contact with financial planning programs and is active in both its local and the national Financial Planning Association.
Yeske also has a formal and rigorous hiring process that includes personality testing and other exercises, such as having candidates take notes at client discovery meetings, write client emails and perform client meeting follow-ups.
The firm adheres closely to the process and rejects candidates if the testing suggests they won't be a good fit. That can be hard when the team especially likes a candidate personally, but retaining the firm's culture is paramount.
"Someone can be the most brilliant mind in the room, but if they don't get along with the team of 14, it's going to cause a lot of issues," Ms. Grove said.
Meanwhile, at FJY Financial, Mr. Yankee said the firm is going through a list of candidates it has been in contact with before and others who have been recommended by directors of college financial planning programs. It has at least one strong candidate for each position at this point.
Mr. Yankee said it's frustrating as a small firm because often the timing of when you want to hire the perfect person versus when that person is available does not match up.
"At bigger firms, when you find a superstar you hire them and eventually fit them into a slot," Mr. Yankee said.