How can RIAs attract top-tier wealth management talent in a sellers market?
Be realistic, creative and try to out-maneuver the formidable competition from banks, wirehouses, regionals, trust companies and other financial service giants, says Kathy Freeman, president and founder of the eponymous executive search firm based in San Luis Obispo, Calif.
"The bigger firms just have more resources," Freeman says. "And desirable candidates are busy and already being paid well so they're not answering calls. Independent firms have to do something to get their attention."
Steep increases in compensation and complacent executives have led to the current sellers market, which has resulted in unprecedented demand for top wealth managers, according to the newly released annual executive survey by the Kathy Freeman Company, "The Talent Class of 2015: They Want It All."
JUMP IN COMPENSATION
Indeed, compensation increased for 60% percent of executives surveyed, and of those, 17% reported an increase of 25% or more. Only 10% reported lower compensation. Not surprisingly, eight out of ten executives stayed put in 2014 -- the highest number since the survey began in 2009. And more than 80% of executives said they expected their firm to increase their hiring this year.
Who is in the greatest demand for wealth management firms? Advisors who can bring in and work with clients, wealth strategists with tax and accounting expertise and successor CEOs, Freeman says.
Total compensation for relationship managers can start at $200,000 and go up to around $500,000. New business development executives can command anywhere from approximately $250,000 to $750,000, according to Freeman.
Compensation packages for accountants and attorneys with "highly technical capabilities," who specialize in sophisticated tax and estate planning strategies, can range from $250,000 to around $500,000. Total compensation for CEOs would be no less than $500,000, and could go up to $1 million, and possibly more, she adds.
HOW CAN RIAS GET IN THE GAME?
Equity, equity, equity. As the Freeman company survey puts it: "Equity continues to be a top priority for executive talent -- 63% said equity was more important in 2014 than it was five years ago."
Wealth managers want a piece of the action in rising markets and with liquidity events looming. If you can't offer equity, outline a path for equity ownership going forward, and be specific in the offer letter, the report advises. One of the surveyed executives put it succinctly: "I would take [a] 50% reduction in compensation to own equity."
Culture counts. Firms that fully engage with advisors win. Failure to "fully appreciate or utilize all of [an advisor's] skills" was one of the most common complaints heard from executives in the survey. "Top performers want new projects and responsibilities," the report concluded.
They also want a life.
"Keep probing until you hit a nerve," Freeman says. "You want to find the real motivation for looking at a new position. Often it's [a] work-life balance. If your firm encourages employees to leave early for children's sports events, let the candidate know!"
Leadership is a lure. Wealth advisors want to work for a firm that has visionary and responsive leaders. While well-intentioned, many top industry executives find it difficult to "inspire loyalty and command respect," the Freeman company report states. "When recruiting, emphasize the superiority of the leadership at your firm and cite specific examples."
Nepotism, incompetence and a failure to achieve stated goals are a turn-off that competing firms should use to their advantage, Freeman counsels.
"Good talent wants to be led," she says. "Let them know you have what they want."
Make your case creatively. It's unlikely that compensation alone will lure a top wealth manager, although RIAs should be prepared to offer candidates a double-digit increase, according to the study.
"Articulate the importance of the position to the firm's overall success as well as the positive impact it will have on that individual's career," the report recommends. "There are still highly talented professionals who are motivated more by career satisfaction and growth opportunities than compensation."
"You have to define why your firm is better," Freeman adds. "You should find something specific that will resonate with the executive."
Know thyself. To pre-empt the loss of talent - and get a fresh perspective on how to attract new talent - consider a third-party evaluation of your firm's leadership, the report recommends. Gaps in skills and ways to improve core competencies should be identified.
For example, some executives are poor listeners and fail to empathize with their teams, the report says.
"Empathy is huge," Freeman points out. "If an executive is in a firm that expects him or her to be available for work after a death in the family or a sickness, that executive may become alienated."
Also conduct exit interviews.
"Give departing employees at every level an opportunity to be completely honest about their experience at your firm," the report recommends. In addition to identifying a firm's cultural and organizational weaknesses, "unflattering comments about your firm's leadership on sites such as Glassdor.com can damage an employer's brand for years."
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