One of the tightest labor markets in history, combined with the extraordinary growth of the independent advice industry, has created a fiercely competitive environment for attracting talent. Nearly three-quarters (73%) of independent firms planned to hire in 2018, according to Schwab's latest RIA Benchmarking Study.
The study also shows that the median firm had $350 million in assets under management (AUM) five years ago. Firms with a median growth rate added two people in the five-year period, on average, and firms in the 80th percentile of growth added an average of five staff members in the same period.
Based on my recent conversations with advisers, the desire to bring on new staff has only increased. One principal from a firm that has $500 million in AUM and is growing at about 20% annually told me that he anticipates hiring two or three people each year for the foreseeable future to keep up with growth.
The need to find talent is even more prevalent for large firms. Two firms, each with around $3 billion in AUM, have seven open positions, and one firm principal I spoke with is actively recruiting for 10 positions.
With firms increasingly hiring talent away from other firms — in 2017, 41% of firms recruited from other RIAs compared with 32% in 2014 — it's important to stand out from the competition. These five best practices can help set your firm apart.
1. Create a strong employee value proposition. Advisers spend a lot of time thinking about their value proposition for clients, but it's also critical to have a solid employee value proposition, or EVP. An effective EVP states what employees can expect at your firm as well as what you expect in return. It tackles questions like:
• Why would working at your firm be professionally and emotionally meaningful?
• How do you invest in career growth and future opportunities for your employees?
• Why is the culture at your firm special?
Once created, elements of the EVP should be used consistently in job postings and discussed during the interview process.
2. Work on your web presence. Your firm's website is not just a vehicle for generating new business. It's also the first place candidates look when deciding whether to apply for a position, which makes it critical to consider prospective employees as a target website audience. Consider the following:
Design and imagery matter. A lot. According to one report, it takes less than two-tenths of a second for an online visitor to form a first opinion of a brand. I've spoken with countless university students who say that if a firm's website does not portray an inclusive and welcoming culture, they will simply not apply for the position or internship.
• Candidates spend the most time on the "About Us" and "Biography" pages of your website, so make sure your firm's value proposition appeals to the minds and hearts of a reader. A prospective employee should look at your website and think, "That's inspiring. I want to be part of that."
• Job applicants are drawn to video, which is an effective and often low-cost way to tell your firm's story. Glassman Wealth Services, for example, does an exceptional job of using video to tell its story and highlight its EVP. But even less professionally produced video, or other content that explains the firm's mission, values, and culture, can be highly effective.
3. Make interviews count. Even for firms with a dedicated HR manager, interviewing multiple prospective employees can feel daunting. A few small steps can improve the interview process and pay dividends over time:
• Lack of role clarity is a red flag for a job seeker evaluating multiple offers, so ensure everyone on your team agrees on the job description before posting it. This is especially important if you're hiring for a specialized role for the first time.
• Once you have invited a candidate in for a meeting, be intentional about interview questions. Assign each member of the hiring team a focus area so that you gain a full picture of the candidate. Be clear about the top skills you'd like your ideal candidate to possess, and ensure that someone probes into each of them.
• Debrief with your hiring team. Comparing notes is the most important step of the hiring process. As each person provides feedback, the hiring manager will get a clearer view of the candidate. Something that may have seemed minor might end up being a bigger theme than anticipated. This process has another benefit: Your hiring team will be invested in the success of your new hire since they participated in the decision-making process.
4. Consider compensation packages. To draw and keep the best talent, firms must design attractive compensation plans. A compensation plan can include salary, performance-based incentives, benefits and even equity, or the potential for equity ownership opportunities over time. Staffing and compensation account for approximately 73% — typically the largest share — of a firm's annual expenses, so it's especially important to understand how to design a competitive offer while taking your firm's budget into account.
5. Don't overlook onboarding. Few things have a bigger impact on a candidate than the onboarding experience. Is their workspace ready to go when they arrive? Do they have a "buddy" who walks them through their first day, shows them around and takes them to lunch? Are there frequent check-ins scheduled during their first 90 days, and meaningful one-on-one meetings with their manager on a regular basis after that? The more you invest in the first few months, the faster that person will contribute and the more engaged they will feel.
Success and growth naturally attract talent — your firm's most important asset. But don't rely on success and growth alone. Investing in your hiring process, your culture and the messages you present to potential employees will improve the odds that you will attract high-quality people who fit with the mission of your firm.
Lisa Salvi is a member of the Adviser Services leadership team and is responsible for Schwab's Business Consulting & Education office.