Recruiting Best Practices Mary Sieck & Chris Flint 1
Agenda Industry Highlights Advisor Trends, Broker-Dealer Marketplace, & Financial Reform: The Impact on Recruiting Positioning for Growth How to Differentiate in a Commoditized Marketplace Ideas to Attract Your Target Profile Marketing & Recruiting On-boarding Best Practices Transition & Retention Open Forum for Group Discussion & Questions Industry Highlights Positioning for Growth Attracting Prospects Recruiting & On-boarding 2
Recruiting Best Practices Industry Highlights 3
Marketplace Observations There has been unprecedented dislocation for advisors associated with larger retail brokerages, regional boutiques, retail bank brokerages, insurers and independent broker-dealers. M&A activity and industry consolidation will accelerate movement between retail distribution outlets. Trends of insurance companies no longer finding the independent broker-dealer business to be compelling. Running an independent d broker-dealer is a low margin business with massive regulatory risk. ex. PacSelect - LPL, ING Lightyear Capital, Nationwide. Broker-dealers are struggling with margin compression and increased exposure to legal and operating costs. More broker-dealers are moving to a multi-channel approach to financial advisor affiliation. Consumer perception of large branded firms has been tarnished. Consumer confidence in under capitalized financial services companies has fallen. RIA custodians are providing many of the services traditionally associated with a broker-dealer. Larger firms have the scale to provide industry-leading services to advisors and their practices. Regulatory response, perceived conflicts of interest within large retail brokerages, regional boutiques and retail bank brokerages will hasten the trend of US based investable assets moving to independent channels with national footprint and diverse revenue lines. 4
Recruiting Observations Regional & national wirehouse advisors are interested in independent affiliation models. However, there has been a historic mismatch between advisors stated interest and actual movement to independent channels. Broker-dealers rank external recruiting as the most important factor to drive future revenue. Service is considered the most important factor when choosing a new broker/dealer. Culture is often considered particularly important factor when a firm is acquired by a new firm. Broker-dealers consider internal recruiters as their primary source of new advisors. Referrals from existing advisors is second. An emerging tactic seen in the independent broker-dealer recruiting is forgivable loans, asset conversion loans and straight transition allowance. 5
Recruiting Observations The trend toward advisor independence, while very real, is overplayed in the industry. Multiple studies suggest an advisor s preferred channel would be an independent channel (IBD, dual registration, or RIA) if they are leaving a wirehouse. The numbers are even steeper for regional advisors, as nearly 75% of these advisors identified the independent channels as their preference. When examining data on actual advisor moves, wirehouse advisors most frequently moved from one wirehouse to another. 44% of these moves were to another wirehouse, 23% were to the IBD channel, and 17% were to a regional firm. 6
Advisor Headcount The number of financial advisors in the industry was approximately 250,000 as of YE09. Shrinking significantly over the last four years. At YE04 there were more than 301,000. Independent broker-dealers rank as the largest of advisor channels with more than 109,000 (including dually registered advisors). Insurance broker-dealers and wirehouses ranked second and third, respectively, with approximately 60,000 advisors each. The dually registered advisor was growing at an annualized rate of more than 22% over 2004 through 2007. Only 12% of investment professionals produce in excess of $500,000 000 and 64% produce less than $75,000. Approximately 35% of our industry started in the business in the 1970s or earlier, implying that many are approaching retirement age, while fewer than 10% of the started in the industry between 2002 and 2007. Attributes influencing the declining number of advisors include the inability of the industry as a whole to hire, train, and develop new advisors; brokerdealers choosing to trim less productive advisors; and mergers and acquisitions causing the number of advisors to decline. Industry trends are secular, not cyclical. Our industry is undergoing rapid change. 7
What Does This Mean Good News: There are many experienced investment professionals. Broker-dealers with a well defined model will attract the best advisors. Bad News: The combined recruiting demand d far exceeds the number of advisors considering a change. What do market leaders do to differentiate themselves? How do you become the broker-dealer of choice? 8
Recruiting Best Practices Industry Highlights Positioning for Growth 9
Factors that Influence Change Dissatisfaction with the overall broker-dealer value proposition. Dissatisfaction with the broker-dealer business model. Shift in direction of the advisor s business. Mergers and acquisitions affecting the broker-dealer culture. Change in the management of the broker-dealer. Changes in compensation and overall affiliation. Operational mistakes or problems. Technology shortcomings. 10
Value Proposition Components Brand awareness & reputation Depth of capabilities Type of clients Compensation Practice ownership Ego gratification 11
Define Your Ideal Prospect What type of platform or financial services sector is best aligned with your company s organizational value proposition? Examples: Regional or national footprint Independent d contractor t or employee Real estate availability Supervisory structure Open architecture for product solutions Investment advisory platforms IRIA policy Practice ownership Client profile Payout Does your business model support this type of candidate? 12
Recruiting Best Practices Industry Highlights Positioning for Growth Attracting Prospects 13
Creating a Marketing Plan Enhance Your Public Profile Develop an advertising campaign Participate in industry events Contribute articles to industry publications Development & implement a PR initiative Proactive Outreach Host information sessions about your firm Develop a drip mail campaign strategy Send personalized letters to your prospects Develop an information/recruitment kit Have a clearly communicated referral program 14
Enhance Your Public Profile Advertising & Branding Create a visual image that supports the essence of your firm. Craft the right message for your audience. Commit to an extended advertising program i.e. print, web, and sponsorship. Participate in industry events. Be visible ibl in industry publications. Know the editorial calendar for industry publications. Develop a media kit for your broker/dealer. Best Practice: Know your audience. Be consistent & confident in your messaging. 15
Reach Out to Potential Candidates Host Information Sessions About Your Firm Have a senior executive lead the presentation. Host events outside your office i.e. neutral ground. Keep the presentation room on the smaller side. Advertise as invitation it ti only and limited it space. Request a RSVP by phone or e-mail. Schedule the event after the close of business & no more than 90 minutes. Allocate sufficient time to network with guests. Call RSVPed attendees the day before or day off indicating your interest in meeting with them. Follow-up with candidates who attended your session within five business days. Follow-up with no-shows the next day with a personal invitation to review the material presented or offer to send material covered. Best Practice: Offer a follow-up piece in exchange for the candidates information. 16
Reach Out to Potential Candidates Send Personalized Letters to Your Prospects Cold Call Letters Send cold call letters to individuals you have researched or those who were recommended to you. For this type of letter, you need to introduce your firm, state why you are writing, pose a couple of questions that will encourage the recipient to consider investigating further. One page. Express your desire to meet. Follow-up Letters Remind the candidate how you were introduced. Explain why you are interested in speaking further. Address certain needs, if known. Provide one or two relevant reasons why you think it might be in your mutual interest to have further discussions. Make a personal note at the bottom of the letter. Best Practice: Include a white paper, article, brochure or recent firm interview. Use handwritten notes; they are always read. 17
Reach Out to Potential Candidates Develop A Drip Campaign Strategy Establish the types of communication you would like to send out to your prospects. Example: firm introduction, event invitation, etc.. Determine which h distribution ib ti channel makes sense for each of your communications. Example: direct mail, e-mail, or webinar. Develop a calendar based on your determined frequency and communication types. No more than monthly. Consider a newsletter or quarterly market reports i.e. create value. Create a process to follow up on all communications. Best Practice: Deliver thought leadership, product information & always drive the recipient back to your website or key contact person. 18
Reach Out to Potential Candidates Develop an Information Kit & Website Capabilities brochure. Product and services brochure. Press releases. Sample statements. Web site demo. Website should be clean and easy to navigate. Avoid embedded noises. Information kit and website should have consistent messaging and signage. Consider an e-brochure. Best Practice: Information kit should group key information about your broker dealer into 4 to 6 sections. 19
Recruiting Best Practices Industry Highlights Positioning for Growth Attracting Prospects Recruiting & On-boarding 20
Recruiting Structure How to Build Out the Recruiting Support Structure In-sourced Recruiting Initiative. Outsourced Recruiting Initiative. Centralized Recruiting Staff. Decentralized Recruiting Staff. Hybrid Approaches Centralized/Decentralized Staff; Insourced/Outsourced. Branch Office Recruiting. Best Practice: Align compensation with profitability characteristics of the recruit. 21
The Courting Process The General Steps Involved in Recruiting Prospect Assessment: Becoming a Candidate. The Selling Process You & Your Broker/Dealer. Presenting the Offer. Gaining Commitment. On-boarding/Transition Process. Post Transition Integration. Best Practice: Become the recruit s trusted advisor by bringing value to every conversation, being consultative, listening and having impeccable follow-up. 22
Prospect Assessment What type of platform or financial services sector is the candidate coming from? What is the candidate s motivation for change? What type of clients does the candidate serve? What are the candidate s assets under management? What is his product mix? How long have they been at their current firm? How many firms has the candidate been with during their career? What does the candidate s personal financial health look like? Best Practice: Have a formal selection process and a selection committee. 23
Pre-Transition /On-Boarding Pre-Transition In-sourced or outsourced approach to transition. Have a well defined transition process with floating time line. Treat a transition much like the integration of a small company. Conduct a practice pre-assessment. Deliver formal transition plan with each step defined. Have a pre-transition briefing or summary profile for broker/dealer management. On-boarding Treat as an event and communicate to broker/dealer employees. Have a welcome call from the president or other senior executives. Send something special from home office (coffee basket), buy advisor staff lunch, etc. Have a welcome sent to include contact and other key information. Have one point of contact in the broker/dealer to field questions, review business, train and counsel the transitioning advisor. Give the new rep a special code, paperwork, sticker, stamp or some other identifying mark to indicate to the company this a new advisor. Best Practice: Have a new rep liaison in each broker/dealer business unit i.e. compliance, operations, etc.. 24
Post Transition Integration Have a formal transition release process. Should certify what the advisor learned in the transition process. Should point out areas for improvement. Have the advisor validate what they learned. Formal announcement to broker-dealer the advisor has successfully completed the formal transition process. Establish a systematic process to incrementally reintroduce the brokerdealer s value proposition over the balance first year i.e. up-sell and crosssell opportunities. Have a formal referral gathering process that begins post transition. Have a anniversary recognition program for your advisors. Best Practice: Communicate a successful integration through a formal press release and or certificate. 25
Recruiting Best Practices Industry Highlights Positioning for Growth Attracting Prospects Recruiting & On-boarding 26
Other Best Practices Use a CRM application. Develop a recruiting & transition survey. Build recruiting metrics into your process & report them. Design a employee incentive plans with the end in mind. Determine if Broker Protocol is appropriate for your broker/dealer. Establish a formal referral program. Host quarterly updates with industry centers of influence i.e. outside recruiters, coaches, wholesalers, etc.. Include the same individuals as recipients of your marketing initiatives. If you host a home office visit, make it a positive and memorable experience. 27
Concluding Thoughts Your brand awareness and what you stand for in the marketplace is critical to the broker/dealer s long-term recruiting success. The current market conditions represent a great environment for hiring advisors from wirehouses, undercapitalized broker/dealers and career insurance agency broker/dealers. Firms that are trying to attract new advisors need to have a value proposition that includes the necessary support for growing the advisor s book of business Cultivate wealth management practices with advisors and provide the necessary coaching, technology and support. Be product agnostic, i.e., allowing advisors to use best-of-breed solutions. Broker/dealers that t can demonstrate t technology leadership will represent attractive partners for advisors in motion. Provide support for dually registered advisors. Make retention and recruiting a strategic priority. 28
Questions & Open Discussion Sources: Pershing TalentConnect sm Series The Race for Top Talent, Moss Adams LLP, 2007 29