Recruiting Redefined. Perspectives on the looming advisor talent shortage. Inside:

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1 INSIGHTS ON ADVICE Recruiting Redefined Perspectives on the looming advisor talent shortage It s a well-known fact that there is an impending talent crisis* across all channels 1 of the financial advisory business. Many advisors are graying and retiring, and the talent pool is shrinking as fewer replacements come on board. The 2014 Fidelity Recruiting Redefined study 2 examined the full recruiting environment to collect the perspectives of multiple stakeholders: hiring decision makers, students, young financial professionals, new advisors, college counselors, and career counselors. Inside: Re-focus on different talent pools Re-position the advisor profession Re-engage talent in a new way This comprehensive review reveals some common misconceptions and suggests actions financial advisory firms may want to consider to help change the tides. *Cerulli Quantitative Update, Advisor Metrics 2013, Understanding and Addressing a More Sophisticated Population, Cerulli Associates. 1 Banks, independent broker-dealers, insurance companies, registered investment advisor firms, and wirehouses. 2 The 2014 Fidelity Recruiting Redefined study conducted by Fidelity Institutional is based on multiple research methodologies including four in-person focus groups with 44 participants in total and four online quantitative surveys with 600 participants in total. Research participants included hiring decision makers at financial advisory firms, students (college and MBA), young financial professionals, new advisors, college counselors, and career counselors interviewed from April through June of All the research was blind Fidelity was not identified as the sponsor during any phase. The study was administered by Greenwich Associates, an independent firm not affiliated with Fidelity Investments.

2 The Financial Advice industry is thriving The financial advisory business is extremely active at the moment: the number of investors seeking professional advice is expected to increase in the next decade, 3 and firms across all channels say recruiting the next generation of advisor talent is a strategic priority. A full 95% of firms in our study are hiring as they look to accelerate or accommodate growth and meet the evolving needs of investors and most are very active in their search for good candidates. Top Four Reasons to Hire To increase/create new firm growth To accommodate current firm growth To meet changing investor needs To bring in more specialized advisors But a talent crisis is looming For every eight advisors that retire, only three are trained to replace them As hiring efforts continue, it s a wellknown fact that there is a talent crisis looming, with many advisors starting to retire and fewer people entering the field. With an average retirement age of 68, Cerulli expects 8,600 advisors will potentially be leaving the profession each year for the next 13 years, reducing the workforce by 1.7% annually. 4 These sobering statistics are leaving firm leaders and recruiters feeling challenged as they look to shore up their staff. Misconceptions have formed as a result, starting with the view that millennials 5 just aren t interested in being financial advisors. In fact, the real issue with the impending talent shortage is that there is a lack of awareness and understanding of the financial advisor role among this younger group. Awareness must be addressed When looking at the student population, there is low familiarity of the financial advisory profession. In addition, millennials appear to have a number of false impressions. For example, many of those surveyed believe licenses and certifications are required to be a qualified candidate, 17% of college students are familiar with the profession even though hiring decision makers also place a lot of emphasis on softer skills. Students believe sales activities are a major part of the job, even though financial and investment planning activities tend to dominate. And, they feel there isn t an opportunity to help people, even though advisors work closely with clients to navigate some of life s biggest challenges. 3 Occupational Outlook Handbook, Bureau of Labor Statistics, 4 Cerulli Quantitative Update, Advisor Metrics 2013, Understanding and Addressing a More Sophisticated Population, Cerulli Associates. 5 Born between 1980 and % of hiring decision makers surveyed see a formidable hiring challenge 2

3 A wide set of perspectives To help dispel common misconceptions, and to identify what the financial advice profession may want to consider to help cultivate new talent, Fidelity surveyed key stakeholders across the recruiting spectrum. HIRING DECISION MAKERS Professionals working at advisory firms with responsibilities that include talent search/acquisition, screening/interviewing, and hiring recommendations/decision making STUDENTS Students at U.S. colleges and universities currently in their junior or senior year (graduating between May 2014 and May 2015); MBA students born between 1981 and 1993 YOUNG FINANCIAL PROFESSIONALS Individuals with up to five years of experience in the financial services industry in a nonadvisory position (e.g., financial analyst, accountant, trader, or investment banker) NEW ADVISORS Younger individuals (born between 1981 and 1993) with up to five years of experience as a licensed financial advisor in any of the main channels COLLEGE COUNSELORS Individuals working at a high school advising students about both college and career options CAREER COUNSELORS Individuals working at a college/ university advising students about potential career options Three important steps Our findings reveal that firms may want to consider taking three important steps to help attract new hires to the profession: RE-FOCUS on different talent pools RE-POSITION the advisor profession RE-ENGAGE talent in a new way 3

4 RE-FOCUS on different talent pools The upcoming advisor shortage calls for looking at candidates through a new lens the strongest talent may actually come from unexpected places. This could include adjacent areas of the firm, such as operations and client service, as well as other industries. Cerulli Associates forecasts headcount to keep declining through 2016, falling by more than 25,000 advisors* 25,000+ Hiring decision makers surveyed said they are struggling to find qualified talent Lack of necessary skills is perceived to be the No. 1 obstacle Yet, hiring decision makers also said many softer skills are important; certifications and market knowledge can come later. SKILLS NEEDED ACCORDING TO HIRING DECISION MAKERS Communication skills: 50% Sales ability: 36% Interpersonal skills/sociability: 33% Ambition/self-starter: 33% Investment/market/product knowledge: 31% Problem-solving ability: 30% 91% of young financial professionals (not currently in an advisor role) surveyed are actively looking or plan to look for a new job in the next few years providing a good talent pool to tap into 74% of firms said advisors with prior work experience outperformed those without this experience, yet only 37% of hires had previous jobs 77% 30% 29% Finance and Insurance Retail Trade Professional, Scientific, and Technical Services Advisors with previous experience came from: Softer skills are crucially important. We screen for these by engaging the entire team in the hiring process to make sure candidates have the skills to foster solid relationships with their clients. Our path forward is to place as much emphasis on testing for softer skills as we do for technical skills. Walter Clark, RMB Capital *Cerulli Quantitative Update, Advisor Metrics 2013, Understanding and Addressing a More Sophisticated Population, Cerulli Associates. 4

5 RE-POSITION the advisor profession Our study revealed that money is important to millennials, but other factors count, too. You may want to consider focusing on attributes young candidates seek in a profession, such as advancement opportunities and a good work-life balance. Also, downplay the need to sell, which turns many of them off. Students and young financial professionals have visions of constant cold-calling yet new advisors say they spend most of their time on other activities PERCENTAGE OF NEW ADVISORS THAT ASSOCIATE THESE ACTIVITIES WITH THEIR ROLE 62% 30% 8% Financial and Investment Planning Relationship Management Sales Consider re-positioning Web sites, job descriptions, and talking points to help attract more talent After reading a job description that focused on attributes relevant to millennials, 51% of students and 40% of young professionals surveyed found being an advisor more appealing 51% 40% You may want to emphasize development opportunities and career paths that are important considerations for many millennials 85% 86% of new advisors are happy with the development support they get from their firm say they have a clear career path and growth options at their firm IMPORTANT ATTRIBUTES IN A PROFESSION Our study revealed that high income, work-life balance, and job security are high on the list of important job attributes for both students and young financial professionals. Further, when new advisors were asked what factors played a key role in their decision to pursue a career as a financial advisor, they confirmed these three aspects. STUDENTS Good work-life balance 58% Provides a steady salary/compensation 47% Job/career security 44% Provides a high income 41% Desired job location 36% YOUNG FINANCIAL PROFESSIONALS Good work-life balance 57% Has growth/advancement potential 56% Job/career security 54% Provides a steady salary/compensation 49% Provides a high income 47% NEW ADVISORS Provides a high income 41% Good work-life balance 31% Aligns with my interests/passion 30% Job/career security 26% Allows me to help people 23% The younger generation is looking for employers who can help them build their talents. Through our promote from within approach, they can see that there is opportunity to build a career here. We also encourage continued education, certifications, and master s degrees. Jim Kacic, MAI Wealth Advisors 5

6 RE-ENGAGE talent in a new way There is a lack of knowledge among millennials regarding the role and typical work activities of a financial advisor. More extensive outreach is needed to help educate this younger generation about the profession even when they are in high school or college. 70% 47% of young financial professionals had a positive perception of the financial advisory profession would consider this as a career 45% of students said they aren t aware of companies that employ advisors WHO STUDENTS DISCUSS CAREER OPTIONS WITH Ambassadors are needed to spread the word about the advisory profession 76% 76% 52% 44% Family members Friends and peers College professors/ faculty College advisors/ career counselors Young advisors can also reach out to millennials to tell their story 79% of new advisors surveyed said the experience was much more positive than expected Most effective component in the recruitment process for hiring decision makers, according to our study 51% 48% 47% 42% Networking activities are an effective way to recruit, and career counselors should be leveraged more Networking at industry or professional events Referrals/ Word-of-mouth Job postings on the company s Web site Job posting Web sites 41% 39% 33% 32% Internships External recruiting firm Career fairs Engaging college career counseling offices We ve built relationships with most of the local colleges in our region. It doesn t matter what size you are, career service offices don t like to turn you away; they want to find employment for their students. This has been a very strong source for us. Jim Kacic, MAI Wealth Advisors 6

7 Actions to consider Competition for good talent is intensifying. As firms look to attract younger professionals, it will be important to reach beyond traditional sources to find new hires. It will also be important to recognize that the work habits, communication styles, and expectations of millennials are very different from those of baby boomers. Knowing how they approach career opportunities, and what appeals to them in a profession, will be essential to both attract and retain these new advisors. Here are a few actions to consider. RE-FOCUS Set your sights on broader segments of the market as you look to hire, especially because many young financial professionals are, or will be, looking for a new job. Employment Web sites are widely used by young financial professionals to learn about job opportunities, according to our study. Consider going beyond a traditional corporate description, and post interesting information that creates a personality for your firm, including details on your culture, team activities, and why people like coming to work. Networking events can be very effective. Take the time to speak with young professionals at your firm and elsewhere to determine what type of events tend to be the biggest draw for this group, and how best to get the word out to help maximize attendance. Of course, there may be excellent candidates within your firm already. Some people may be interested in a career path that moves them from areas like operations and client service into a financial advisory role a great way to groom young talent. RE-POSITION Take steps to speak about the profession in a way that resonates with millennials, outlining how advisors have an important and positive impact on clients by helping them address key financial and life decisions. Consider creating a story that outlines your value proposition for employees just as you have likely done for clients. By knowing what current and potential employees care about, it s possible to create a story that inspires and motivates them, and makes them want to be part of your team. This should be pulled through your Web site and collateral in a consistent way. Put any sales responsibilities into context by explaining that it s a natural part of relationship management, and likely to be a smaller component of their role in the first few years, according to our study. Many firms place new advisors in teams and only give them sales responsibilities after they have been with the firm for a number of years and are more experienced and confident. Make a point of discussing typical career paths so candidates can see what kind of advancement is possible, including any routes to acquiring equity or a partnership in the practice over time. Consider having younger employees describe their experiences as well, to create a degree of excitement about the position. Describe training and mentorship programs to new recruits, and opportunities for further education. If you don t do so today, consider offering financial support for certifications and other professional development activities to underscore your commitment to continual improvement. 7

8 RE-ENGAGE Take additional steps to get the word out about the profession and about your firm. When working with colleges and universities, recognize that you will need to be visible throughout the year to build relationships with career counselors, faculty, and students. Consider a combination of tactics, such as being a guest lecturer, having networking events, and participating in job fairs. College students we spoke with suggested advisors may want to consider offering free educational sessions on campus to help students with budgeting, personal finance, and managing student loans as a means to build relationships with younger talent, and educate them on the role of a financial advisor. Also leverage existing, but underused, networks, such as social networking sites* and student/alumni directories, which are the top two sources for actively recruited candidates, according to our study. College students we spoke with said that having alumni come back to campus for recruiting or other events was one of the most effective ways for them to learn about a particular role or company. As you reach out, be sure to describe career paths that are available, and the potential opportunity to ultimately lead a team. Also, outline mentorship and professional development programs that are in place. Recognize that millennials are never too young to hear about being a financial advisor. According to our study, college and high school counselors alike agree that there is a great opportunity for any industry to do a lot more at earlier stages to create a level of interest. College and high school counselors that we spoke with were resoundingly eager to partner with firms in their community on internship or educational programs. Job shadowing for a day is a great way to see an advisor in action. Internships also provide the opportunity for both parties to determine if there is a fit. Because interns will report back to their schools and peers about the experience, be sure to give them important work where they can feel challenged. Also, prepare your team for the arrival of any intern and have them take responsibility for making it a rewarding experience all around. *Advisors need to be aware of, and keep in mind, their firm s policies regarding social media. 8

9 200 SEAPORT BOULEVARD BOSTON, MA To gain additional insights from this study, visit go.fidelity.com/recruitingredefined. To learn more about Fidelity s research on advisors, please contact your Home Office or Fidelity Representative, or visit go.fidelity.com/insightsonadvice. For investment professional use only. Not for distribution to the public as sales material in any form. Fidelity Investments does not provide advice of any kind. You should conduct your own analysis, review, and due diligence based on your specific situation. You are responsible for evaluating your own specific needs and making appropriate decisions. Those decisions may be based on these and other factors you deem relevant. The information provided herein is not meant to be exhaustive of all possible options you may consider. The third parties listed are independent companies and are not affiliated with Fidelity Investments. Listing them does not suggest a recommendation or endorsement by Fidelity Investments. The third-party opinions expressed herein are solely those of the author and in no way represent the advice, opinions, or recommendations of Fidelity Investments or any of its affiliates. The Fidelity Investments and pyramid design logo is a registered service mark of FMR LLC. Fidelity Family Office Services is a division of Fidelity Brokerage Services LLC, Member NYSE, SIPC. Fidelity Institutional Wealth Services provides brokerage products and services and is a division of Fidelity Brokerage Services LLC. National Financial is a division of National Financial Services LLC, through which clearing, custody, and other brokerage services may be provided. Both are members of NYSE and SIPC. Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 2014 FMR LLC. All rights reserved