If you haven't had to fill any vacancies in a while, your next job posting may bring a rude awakening. Recruiting and hiring experienced client-facing advisors has become very difficult, with demand high and supply low, say a number of executive search specialists.
Although the job market for all advisors is robust, the talent shortage among firms catering to extremely wealthy clients is particularly acute. That's good news for advisors, but a problem for firms hoping to expand. "The higher up you are on the food chain in terms of the size of your clients and the size of your business, the more choices you have," says Danny Sarch, president of Leitner Sarch Consultants in White Plains, N.Y.
The talent drought is causing firms to pay more, take more time to fill positions and consider giving equity to new hires, according to executive search and wealth management executives. The tight market is also forcing high-end wealth firms to start grooming less experienced relationship managers.
In fact, a recent study by the Family Office Exchange, a network for ultrawealthy families and their family offices, cited "the relative scarcity of top-tier client-facing talent" as a "key operational challenge" for multi-family offices and wealth advisors.
At the mid-market level, advisory and brokerage firms also find themselves needing advisors more than advisors need them, search firm executives say. Headhunters say searches for mid-market firms now take two to three times longer than several years ago.
"At the low end, it's four months; at the high end it can be as long as a year," says Ron Edde, president of San Diego-based Millennium Career Advisors.
Rich Schwarzkopf, who heads a recruiting firm in New York, agrees. "It's definitely different from five years ago. If it took three months to place somebody then, it's six months now," he says. "And it can be much longer."
While a shortage of top client-facing talent is a perennial problem for high-end wealth advisors and family offices, the market is particularly constricted this year, industry executives say.
While the economic recovery has boosted equity markets and increased assets under management, firms have also been making a greater effort to retain their experienced relationship managers. That has further constricted the job market, as potential candidates say they have stopped looking around.
In fact, less than half of advisors surveyed recently by Kathy Freeman, who heads an executive search firm in San Luis Obispo, Calif., said they would consider an opportunity outside the firm where they currently work. That's a huge drop of 30 percentage points from the 78% who answered that question affirmatively in 2009.
One result of the scramble for talent: Soaring pay packages. Total compensation for top client-facing talent is now nearing $1 million, industry sources say; even below that top tier, firms serving the wealthiest clients now pay $400,000 to $800,000. Searches for those candidates now frequently take six months or more, up from two to three months, recruiters say.
"The market for those who have the complex set of skills necessary to work with high- and ultrahigh-net-worth clients and wealthy families has expanded, and the development of talent has not kept up," says Freeman, who specializes in finding client-facing executives for wealth managers around the country.
To attract talent, firms will need to "offer equity more frequently and act more decisively than they have in the recent past when a compelling candidate has been identified," according to Freeman's 2013 industry survey.
In fact, Freeman says, clients sometimes prefer equity to upfront compensation. "People are willing to step back in cash to get equity and a bigger piece of the payout down the line," she says. "But it's not just about economic opportunities. These executives want to believe in a company and its vision."
In addition to offering more money and equity, family offices and wealth management firms are also offering potential hires forgivable loans and more freedom on the job, says Jane Swan, the former head of search firm giant Korn/Ferry International's wealth management division. "It is a seller's market and relationship managers are looking for independence and access to the right investment solutions as they service their clients," says Swan, who is currently setting up her own firm.
Firms also need to move fast when they find the right candidate, Freeman advises. "If the right fit comes along, they can't just sit there," she says. "There aren't going to be two or three other candidates who are just as good right behind them."
BARGAINING FROM STRENGTH
Advisors serving less-affluent clients can also bargain from a position of strength, says Mindy Diamond, CEO of Diamond Consultants in Chester, N.J.
"If someone generates $700,000 in revenue and has $100 million in assets, their transition package won't be as large," Diamond says. "But it's still a seller's market for them. There isn't a firm around who wouldn't want to hire that person if their assets are growing, their compliance record is clean and they are a quality individual," she adds.
Mid-market firms are also ramping up their recruiting efforts and strategies to snag desirable advisors. "We're seeing an increased use of external recruiting," Edde says. Some firms are cold-calling brokers in their market to see who may be interested in leaving their current firms, Schwarzkopf adds, as well as offering financial incentives to employees who can bring in new recruits.
BCG Securities, a boutique firm based in suburban Philadelphia, recently posted a new recruiting video on its website and even issued a press release announcing that it was "looking to hire new financial advisors."
A big part of BCG's recruiting strategy is to contrast the $1.5 billion firm with its larger competitors, says national sales director Jake Reardon. "We emphasize our boutique style and the fact that it's a family-run business," Reardon says. "And we know that bigger firms are forcing advisors to do certain things, like not bringing on new clients with less than $250,000. We tell them they can be very successful here if they have 50 clients with $250,000."
At high-end firms, such as Manchester Capital Management, strategies to deal with the talent shortage include in-house programs to train younger advisors to assume more sophisticated relationship-management skills.
Manchester has made a point of bringing on bright young professionals in their mid-20s, often at the recommendation of clients, says Murray Stoltz, president of the New York firm. The firm puts these "next generation" advisors on teams where they can observe senior executives and begin to interact with clients.
By the time advisors are in their early 30s, Stoltz says, they are "pretty capable" and ready to "ramp up to the next level" to take on client-facing responsibilities. "It's proven to be a very powerful program and mutually beneficial for everyone."
The shortage of experienced talent has also pushed Greycourt & Co., a family office in Pittsburgh with $10 billion in assets under management and an average client size of approximately $160 million in investable assets, to "grow our own," says Chairman Greg Curtis.
"We typically hire someone with an M.B.A. and/or a CFA who already has about five years of experience, then train them in-house," Curtis says. "The result is that we currently have four generations of client advisors."
Charles Paikert is a senior editor of Financial Planning.