As the financial advice industry continues to grow and evolve, the biggest challenges for financial advisers go well beyond issues related to asset management or even financial advice.
At the
InvestmentNews Best Practices Workshop in Chicago on Wednesday, topics discussed included everything from hiring and compensation, to technological innovation.
Mark Tibergien, chief executive of Pershing Advisor Solutions LLC, reminded the audience that in an industry where the average age of an adviser is 57, it is crucial to consider the unique nature of the next generation of professionals.
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“Compensation is not always a motivating factor, but it can be a disqualifier if other factors are not aligned,” he said. “When interviewing a prospective employee, it is common for us to rely on the resume and we're particularly impressed by where someone went to school and their history, but that doesn't tell us what drives them or their focus.”
The idea, as more advisers are learning, is that it is easier and more productive to hire better than it is to have to hire repeatedly.
Mr. Tibergien emphasized what he called the “hygiene factors,” including factors such as working conditions, commute and job security as considerations on which candidates often focus.
“I don't believe you can motivate people, but I do believe you can de-motivate people,” he said. “As the saying goes, companies hire people and managers lose people.”
What was once almost a cottage industry of small independent advisory shops has become large and diversified, and has drawn all the challenges that come with operating any growing business in a competitive industry.
Ignoring issues related to staffing and business management no longer will cut it.
“It's key to know when and how to add a new position,” said Marie Dzanis, head of sales and servicing at FlexShares Exchange Traded Funds.
“Traditionally, advisers would try to add a jack-of-all-trades so they could fully utilize that person, but that might not always work,” she said. “And you have to be open to looking at employees coming from different industries.”
Kelli Cruz, managing director of Cruz Consulting Group, emphasized the challenges related to “inspiring” the younger generations.
But she also acknowledged a point made by Mr. Tibergien: Veteran advisers can learn a lot, especially with regard to new technologies, from younger employees.
Mr. Tibergien called it reverse-mentoring.
Regarding the issue of bonuses and compensation in general, Ms. Cruz recommended offering everyone financial incentives, regardless of title or role.
“I've seen the most success where people get a little piece of the action, and my point of view is everyone should be available for an incentive plan,” Ms. Cruz said. “Let's be honest: It takes your entire team to bring in new business, so why not let everyone have a piece of that?”
Natalie Pine, partner at Briaud Financial Advisors, said that her firm doesn't use cash bonuses for any employees but that the company does provide multiple nonmonetary bonuses, such as fun trips and free iPads.
She said that she has learned to not take the hiring process lightly and explained that it can take up to a year to fill a position.
“In the initial interview, I try to think if I would be able to sit in a car for two hours with this person, and then still want to spend time with them afterward,” Ms. Pine said. “We also do significant testing on judgment and critical thinking, IQ and numbers skills.”
A common theme was a lack of available talent to fill a growing list of different positions at advisory firms.
Jeffrey Roof, president of Roof Advisory Group of Harrisburg, Pa., said that it doesn't help to be located in a less-populated part of the country.
“Making sure we have the right fit has been crucial, especially since it is probably going to require a relocation, but we're also strong believers in developing from within,” he said.
Armond Dinverno, president of Balasa Dinverno Foltz LLC, said that his firm has already hired five people this year.
“We're always looking for great talent, but you have to create a culture that people want to be at, but somebody has to create that culture because it includes every touch, interaction and communication,” he said.
“Hiring is not a science. It's an art, and you have to be able to deal with that,” Mr. Dinverno said.
