Financial advisers may be ready to hire this year, but many aren't in a position to attract the brightest young candidates, according to a recent survey and participants in a related recruiting round table last week.
According to the fiscal-first-quarter TD Ameritrade Advisor Index of 502 registered investment advisers, just over half said that they don't have written job descriptions for the positions in their company, and two-thirds have no defined career paths for new hires. Yet younger and less experienced job candidates typically want both those things, advisers with recruiting experience said.
That may partly explain why 22% of the RIAs surveyed last month by phone ranked hiring as their biggest challenge in managing people, compared with 18% who said firing.
“We try to put ourselves in the employees' shoes and understand what is of value to them,” said Nathan Paulson, managing partner of Paulson Wealth Management LLC, which has been actively recruiting entry-level advisers.
“In our rush, we can sometimes forget to do that,” he said, speaking as a panelist during the round table held in Chicago on Thursday and sponsored by TD Ameritrade Institutional, a unit of TD Ameritrade Inc.
The company plans to release the survey in the next few weeks.
A DEAL BREAKER?
Younger hires in particular may be wary of taking a job without a clear set of responsibilities and a timetable for moving up, along with the training needed to advance.
It could even be a deal breaker for some, according to the advisers who took part in the round table.
Experienced hires don't really need a career path, though having a formal hiring process in place is still a good idea, Mr. Paulson said.
But having a long-term plan that can be communicated to younger job candidates is essential.
“You may be in a smaller role in the beginning, but we are setting a path to where you want to be,” he said he tells potential hires.
Advisers generally seem more optimistic about their hiring plans now than at the beginning of the year, with 38% saying that they plan to hire, according to the TD Ameritrade survey. In its January survey, however, just 30% of advisers said that they expect to hire specialists or experienced staff members in the next 12 months.
Smaller firms in particular may have trouble attracting young talent if they can't offer career paths, clearly defined job descriptions, training and regular performance evaluation, according to TD Ameritrade's research.
“When you recruit high-potential candidates, they want to know the career path,” said Susan Chase Korin, chief operating officer of Balasa Dinverno Foltz LLC, an advisory firm that manages about $2 billion and hired eight new employees in 2011. “They know it is not written in stone, but it allows them to see the potential of coming to a smaller firm rather than going to the large brand name.”
Part of the problem could be that advisers seem to take an ad hoc approach to personnel issues, with 52% saying that they turn to other advisers as their top source for advice on human resources management.
Having a formal hiring process in place, including personality and aptitude testing, makes firms more comfortable allowing new hires to have direct client contact right away, which just 61% of advisers said that they do.
"MANY HATS'
Advisers may not realize they need professional HR management, said Amit Dhawan, chief operating officer and quantitative-research analyst of Geneva Investment Management of Chicago LLC, which hired its first human resources manager in recent months.
“In the early days of a firm, everyone wears many hats,” he said.
That changed as the firm grew and people no longer had the time or knowledge to handle tricky personnel issues. The firm has developed wide-ranging training programs, which its centralized HR department coordinates.
“Employees get trained on everything, even if they don't use it at all,” Mr. Dhawan said. “That way, if clients ask a question about it, you can answer without saying, "I'll have to get back to you.'”
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