Strategies to keep star young wealth managers from bolting to a competitor should be at the top of every firm's priority list. Losing just one advisor means forgoing decades of potential revenue from clients.
But in a fiercely competitive labor market, crafting a winning blueprint for retaining key wealth planners is challenging.
Even as some financial giants announce layoffs amid the steep market downturn, wealth management remains a highly lucrative business. With advisors in high demand, industry recruiters expect 2023 to be tougher still for firms seeking to woo seasoned talent.
"If you're an experienced, productive advisor, there have never been so many choices in terms of firms or business models," said Mark Elzweig, an industry recruiting consultant. "Every year, there seem to be new players coming into the marketplace. So the opportunity set for advisors, in terms of which firms they can affiliate with, keeps expanding."
This year's Top 40 Brokers Under 40 lists, which rank the most productive advisors under age 40 by individual annual revenue, signal how high-performing younger advisors are taking advantage of the plethora of choices.
To see the overall list of the top 40 brokers under 40,
To see the list of the top 40 regional brokers under 40,
Both the No. 1 overall broker, Jenny Tsai, and the No. 1 regional broker, Andrew Feichter — who are each at the top of their respective lists for the second year in a row — moved from a wirehouse to a competitor earlier in their career. Tsai was poached by another wirehouse, and Feichter left for a smaller shop. Both said they were primarily drawn to a place that offered better support for serving their client niche.
Fully one quarter of our top 40 overall brokers this year, or 10 out of 40, moved to their current employer from either a wirehouse or from a large bank, such as J.P. Morgan and Credit Suisse. Among the top regional brokers, 14 of the 40, or fully one-third, had worked at and left a wirehouse firm earlier in their career, according to BrokerCheck records.
Although this group may not be representative of all younger advisors, the numbers here fit into an ongoing trend of the biggest firms losing many productive advisors to smaller competitors in recent years.
Prevention is the best medicine
Wirehouse
"The payout announcements of this year just underscore the fact that it's a very competitive marketplace," Elzweig said. With firms reluctant to tamper with their grids and reduce advisor payouts, he added, "the only real changes are around the margins, meaning incentivizing advisors for growing their businesses."
Some advisors think their employer already takes too big a share of their revenue. "The reality is, firms like wirehouses are keeping more than 50% of the revenue that advisors generate," said Jason Diamond, a vice president and senior recruiter at Diamond Consultants.
But while firms continue to be willing to pay top dollar to recruit advisors externally, they sometimes pay short shrift to keeping those advisors on board, Diamond said.
"The retention piece seems like it sometimes gets overlooked — which is a little bit ironic, because you'd think it's cheaper to retain an advisor than it is to recruit a new one."
The risks of attrition are particularly acute for wirehouses. In its
"A combination of technological- and pandemic-driven disruption has exacerbated [attrition], with 15% of advisors at wirehouse firms and 7% of independent advisors now categorized as 'at risk' of leaving their firms in the next two years," J.D. Power said.
When young advisors leave
Older advisors can be enticed into staying put via contracts that offer to let them sell their business back to the firm upon retirement. But the same trick doesn't work for younger peers.
"An advisor who has five years left of their career and plans on retiring in five years is more likely to say, 'Is it perfect? No, but I'll suck it up because I only have five years left,'" Diamond said.
By contrast, a younger advisor is less likely to wait it out and more likely to jump ship to a competitor, simply because they have a longer career runway.
In some cases, firms treat this end game as a foregone conclusion, Diamond said, and don't invest as much in their preventive game. "There's a bit of this prevailing feeling that advisors who are going to leave, are going to do so anyway. So we need to recruit to replenish the ranks."
But that mindset can become a self-fulfilling prophecy. And it can eat a hole in the balance sheet of a firm that preemptively treats such advisors as flight risks while avoiding the work of investing in their longevity at the firm.
The ones that got away: picking another wirehouse
Tsai, who took the top spot overall among brokers both this year and last year, began her career at Merrill Lynch in 2008 and moved to Morgan Stanley
"I never regret joining Morgan Stanley," she said in an interview. "I saw a lot of improvement and support from Morgan Stanley [since joining], especially on international business."
She also cited strong support from other advisors at the firm and managers, including those at other offices, and said she could reach her managers easily by phone for help with any problem.
Morgan Stanley provides advisors with a wide array of resources for their practice that are "not just investment and product-wise," Tsai said. They include family office resources, next-generation marketing tools, and support for cross-border business. Tsai said she liked the open communication platform for brokers, which is open to all wealth advisors — not just the senior ones.
"It's very important to grow my business. These kinds of resources and enhancements really helped me to focus on my clients, my prospects, to continue to build stronger relationships with a targeted approach," Tsai said.
The firm helped her stay abreast of compliance regulations as well.
Tsai said her annual revenue had grown by around 50-70% over the past eight years since she moved to the big wirehouse.
All of that is a lesson for younger talent. "I think they will need more support, resources and also more open communication methods that they can use to get their voice out, whenever they need help," Tsai said.
The ones that got away: Choosing a smaller firm
Feichter, a broker at regional boutique William Blair who ranked first among regional brokers for the second consecutive year and also featured in the overall top brokers list at No. 13 this year,
He watched as his clients' assets plunged around 40% in the 2008 financial crisis. The company's stock went to 98 cents. Morgan Stanley
His move to Morgan Stanley involved migrating client information and becoming part of a bigger advisor pool that didn't feel like a fit, Feichter said. So he decided to find a new employer.
"Overall it was, where can I hang my hat that's best for clients? And I couldn't look clients in the eye and say, 'Hey, we're going back to a bank that was going to be in the news again,'" Feichter said.
He recalled the pointed questions from anxious clients at the time. "It was a lot of, 'Is Citigroup going out of business? It's 98 cents. What's going on with my money?'"
Clients also complained about problems with mortgages and credit cards that the rest of the bank handled, which were "out of our hands," Feichter said.
"There were so many different facets of that big broker-dealer service model that comes on us not by our choice, but just by default."
Feichter called around at the other wirehouses, as well as at Credit Suisse and independents. William Blair, as a boutique wealth firm, appealed to him for its small firm culture and opportunities to grow and make partner — a relatively uncommon business model for the industry. It also provided a greater willingness to let Feichter take on clients such as entrepreneurs and young executives, whose wealth profiles were not seen as ideal at the time by his former employer.
"The ability to be in a private partnership, like Blair, where we control our own destiny, we build our team from the ground up — I was able to do that over the course of 10 years," Feichter said. "I have a team of five, I was able to make partner. That was one of my biggest driving factors."
Feichter said access to the C-suite at Morgan Stanley was hard to come by. By contrast, at Blair he can easily shoot an email to the CEO if he needs support with a promising prospective client. "He's like, 'Andrew, let me know what I can do. I can bring in some investment bankers,' if that's the industry they're in."
Although Blair doesn't have the same big-ticket recruiting deals as some firms, "I thought if you're a long term player, this will in essence … be a better play for myself and for clients," Feichter said.
"It's been proven to be that."
The cost of losing talent
As Shareen Luze sees it, keeping talent in-house at a brokerage is a matter of being "fiscally responsible." To hire a new advisor and replace someone who leaves, firms often have to tender many multiples of annual average pay upfront.
Luze, who is the head of culture and field experience for regional firm RBC Wealth Management — which had the second highest number of featured advisors on FP's Top 40 Regional Brokers Under 40 rankings this year, at eight — said she noticed wirehouses and other brokers inking deals with 325% of trailing 12-month — in other words, an upfront cash payment, usually to be repaid as a multi-year loan, of over three times the revenue a financial advisor generates in the prior year.
"That's your replacement cost," Luze said.
But there's more. "That's not even the recruiter fees, the onboarding fees, the transition costs, the marketing costs, and the loss of the institutional knowledge, the loss of — I call it goodwill, and I don't mean that in a hokey way, but I just lost somebody who was an RBC ambassador," Luze said.
Although Luze said RBC has a low attrition rate, the number of senior advisors retiring each year from the firm is already a costly talent drain. It also carries an added bite, as the industry as a whole skews older and there are far fewer young advisors than older ones.
"I mean, just having a huge year in recruiting, you're only covering the people you lost to retirement," Luze said. "So it's really challenging."
Training, coaching and sunsetting
In recent years, wirehouses and large brokerage firms have tried using big programs to tackle the challenge of keeping young advisors aboard.
"These firms recognize that it's cheaper to retain than recruit new advisors," Diamond said.
He sees
There are also what is known as sunset or retire-in-place deals. Crafted by the big firms, these are programs that allow senior advisors to retire while selling their book of business to a junior colleague. In exchange, the firm pays cash to the outgoing advisor.
"The structure on those deals is often such that it keeps the junior advisor tied to the firm; it keeps them more captive," Diamond said.
Elzweig agreed that letting young brokers inherit client books is "a powerful way to keep really talented up-and-comers." This is especially the case when the outgoing senior advisor is also willing to mentor their successor and help them learn the ropes on the way.
Among the top brokers on our overall list, Krystal Julius — a Merrill advisor and the leader at Eckerline Wealth Management Group who ranked fourth this year and was No. 2 last year — said in her
Asked if Julius had signed a sunset deal and could share specifics, the firm did not provide a response as of this writing. Following FP's inquiry on Jan. 30, the above sentence was removed from the firm's website.
Outside of succession plans, firms are putting junior advisors on teams with seasoned, successful colleagues who mentor them and help grow their book of business.
"I think that newer advisors are especially very open to coaching programs," Elzweig said.
Wirehouses have many built-in programs and resources to train young talent. But for industry compensation expert and consultant Andy Tasnady, the challenge is helping advisors snowball their books of business.
The most important thing those firms can do, Tasnady said, is "determine where they can grow their revenue and client base the most in years to come. "If you're at $500k, where can you be to get to $1 million?"
This is especially important because advisors don't get paid on a salary basis and instead are compensated through "100% incentive" based pay, Tasnady said.
In the past, it was hard to break in because advisors had to have a certain amount of sales to survive, so they prospected with cold-calling. "Firms would hand you a phone book," he said.
Now, he added, "the job has gotten a lot more difficult. You're selling the product, a continuous advisory type of relationship, more demanding type of expertise than pushing a particular investment."
The difficulty of just getting established can drive many young advisors out of the company, if not out of the profession, Tasnady said. Firms that can ease young advisors into today's more intangible road to success will have a better chance of keeping them.
What 'culture' actually means
Beyond that, it's all about the culture — a word that gets thrown around by HR managers and executives but often misses the mark in execution.
"It's pretty simple. It's trust, which is a two-way street. It's freedom," Diamond said. "Advisors just don't want to be lied to, they want to be valued, especially ... when firms roll out compensation plans."
Beyond the comp grids, having autonomy to run the business day-to-day is also important. Think company permission for an advisor to promote their brand on social media, write a newsletter, create videos or podcasts and trade without layers of approval. Layer in not feeling pressured to cross-sell banking products like credit cards and mortgages. Such personal liberties are harder to come by for many wirehouse advisors that Diamond has worked with.
"The problem is, it's much easier to quantify the revenue gained from selling bank products than it is to point to, 'these advisors left specifically because we told them to sell bank products,'" Diamond said.
"It's the little things that add up to death by a thousand paper cuts."
For wirehouse leaders who may be limited in their ability to approve such kinds of freedoms for brokers,
As a leader at a regional firm, Luze said her team's approach at RBC has been to personalize benefits for advisors, even meeting one-on-one with some who have specific needs that they might not get at a bigger firm like a wirehouse, where the treatment is very "one-size fits all," she said.
"What I hear without exception from all of the advisors who joined us from a large firm, it's that personal interaction … how meaningful it is that the president of the firm knows their name, and often knows their partner's name," Luze said.
"I had a meeting with a millennial-aged advisor, great producer," she added. "She's hiring new staff, and she has very specific ideas about what she wants her team to look like. So we were talking about, how do we support you in the recruiting? How do we support you in the onboarding of that staff member?"
The advisor in question was seeking a successor. "She's not looking just to fill a seat, she's looking for someone to be a long-term partner … it's having those conversations and meeting each advisor where they're at," Luze said.
Luze added that RBC offers advisory councils for advisors and staff on culture and has been distributing engagement surveys to see how the firm could improve things for employees.
One survey of the branch offices a few months ago revealed that real estate, flexibility and branch environment were big areas where staff wanted more support. Young advisors, who tend to have families to raise, were especially keen on more remote work options. The same was true for younger support staff. Many clients also preferred remote meetings.
"Our younger population, they want more flexibility. They want three days in the office versus five," Luze said, adding that the firm intended to support that.
The CEOs of JPMorgan Chase and Morgan Stanley, by contrast,
Although pain points have come up for hybrid teams, such as the pet peeve of being unable, for regulatory reasons, to print documents at home, advisors have found a way to maintain the benefits of flexibility. Luze cited creative workarounds like tag-teaming who's in the office on a given day and having them do the printing that day on behalf of colleagues who are home.
Younger advisors also need support for their own unique problems, especially as part of the "sandwich generation" stuck both raising children and caring for aging parents at the same time, Luze said.
To support staff with these challenges, RBC offers both backup childcare and eldercare subsidized by the company.
"The things that we have are not like other financial services firms, they're like a Google. They're like a Silicon Valley super trendy kind of company," Luze said.
For example, RBC partners with a company called Milk Stork that helps breastfeeding mothers with business travel without the hassles of going through TSA airport security screenings, and ships their milk to their destination for them.
This year, RBC introduced the Hinge Health app for employees to access remote physical therapy.
"When I talk to recruits about this, they're just blown away. They're like, 'you have what?'" Luze said. "It isn't something that everybody needs and it's certainly not something you need all the time, but when you need it, it makes such a difference."
Those who stay
Not surprisingly, for two of our Top 40 under 40 brokers — one from the top overall brokers list and one from the top regionals list — a supportive work culture, at least one that worked for their personal situation, was among the key reasons why they have stayed.
Hilary Doherty, a wealth manager at RBC who is one of the top regional brokers this year, said in an interview that she had entered the profession as a career changer who began as a
"We provided feedback. We needed more support in these areas. And all of a sudden, there's a huge team there to support us and then circling back around at some of our conferences," Doherty said.
"I can't tell you how great that made us feel. To say hey, our feedback was listened to and implemented."
She added that the firm's permission for advisors to text clients on company-issued phones, and its investments in better technology tools that help her engage in deeper planning exercises with clients, also provided a big incentive to stay.
Similarly, Merrill advisor Krystal Julius said that management had been flexible and accommodating of her work-life balance and equipped her with strong digital tools to do her job.
"The whole company has company-issued laptops and cell phones," she said. "I have a secure text message system so that I can get to clients quicker and faster." She said that texting comes more naturally to clients and helps her relate better to the younger generation of a family in line to be heirs.
Julius said she has been approached by other firms looking to recruit her. But she has opted to stay with Merrill, where she started out, because she feels that tools like these help her to succeed.
She added that maintaining clients' data privacy and keeping up with the best cybersecurity practices and tools are especially important to millennial advisors and advisors in general.
"If I were independent, and I had to pay for software for protecting my clients information, for cybersecurity, is that really in their best interests?" Julius said. "We have a major firm spending millions and millions of dollars to protect my clients' information. I just sleep better at night."
Still, she said the wealth management industry could be more accommodating to parents, and to new mothers in particular, if it wants to retain them, especially when they are just starting out.
The industry remains dominated by men, and racial diversity also lags, despite
Recent statistics released by the CFP Board show that women still make up only 23.6% of all certified financial planners, despite making up 50.5% of the U.S. population.
"It is a harder barrier to entry," Julius said.
She recalled "a lot of late nights" studying for a certification while parenting two young children, who were ages two and four at the time. "It took so much sacrifice at that life stage to get that accomplished."
In her case, her team supported her through raising her children, especially amid the pandemic.
"Our physical offices have been transformed to have study rooms, mother's rooms, making it a really approachable work environment," she said. "There's a meditation and mindfulness room in our office."
When Julius went on maternity leave, she said that "I felt like I knew where I stood around coming back to work." Because she works with multigenerational families, being able to share that she has a sick child or working from home during the pandemic offered some clients a reminder of their own grandchildren.
"It opened up for me a deeper conversation with the client, because you're more relatable."
