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Want to Attract the Best Execs? The New Must-Have

Hoping to attract a top-tier wealth management executive? Offering equity is no longer optional — it's mandatory.

"In this market, equity is now table stakes if you want to hire the best and the brightest executives," says Kathy Freeman, president of an eponymous executive search firm that just released its annual survey of wealth management executives. "In the past, top advisors considering changing firms would take less cash in exchange for equity. Those days are long gone. Equity participation is now the starting point for any offer."

Indeed, 70% of the 300 executives surveyed said they have equity in their compensation package, and 74% said they received their allocation within the past 12 months.

Source: Kathy Freeman Co.


Perhaps not coincidentally, the survey also found that only 15% of wealth management executives moved to a new firm in 2015 — the lowest percentage since Kathy Freeman Co began asking the question in 2010.

"Senior executives didn't have time to return search calls," Freeman says. "There wasn't any need to — there was a lot of career complacency. They weren't feeling any discomfort or dissatisfaction."

If a stock market decline erodes wealth manager's assets under management, that scenario may change this year, Freeman says.

"Shrinking margins force both firms and managers to re-evaluate their situations," Freeman explains. "The markets may force their hands."

Source: Kathy Freeman Co.

Currently, however, while 66% of survey respondents said they would consider making a move to a new firm, more than half said they were only "somewhat motivated."

So how can advisory firms find top candidates?

Here are some tips from Freeman's "Talent Trends 2016" report:

  • You’ll need quantity to find quality.

The pool of available candidates remains small, so be prepared to expand your search.  Employers may need to cull through hundreds of potential candidates to identify, assess and attract the right one.

  • Highlight momentum.

Executives will opt for another firm that has demonstrated momentum. Put another way, a static story is a deal killer. Firms should cite three or four headline numbers, statistics, or compelling illustrations during conversations with candidates to reel them in.

  • Tricks of offering equity.

Be ready to customize each equity award based on experience and where the candidate is in his or her career. For more seasoned executives, make sure a long term incentive plan or grants correlate to their career lifecycle.
For younger executives, equity may not be perceived as essential, even though it is. While a five year vesting schedule is attractive for baby boomers who value tenure, many millennials aren’t motivated to stay with any one firm. Firms offering equity to retain next generation executives will need to educate them on the importance of career longevity, and how career commitment ties into personal wealth generation.

  • Emphasize diversity.

"The business imperative is there," Freeman says. "Clients are more diverse and they want to do business with people like themselves. Minorities will become a majority in the United States within 30 years, and millennials are used to — and expect — diversity."
However, the survey found that most firms are making only modest progress in diversifying their workforce. Smaller firms in particular believed they just too small to have to think about or address diversity. But "nothing could be further from the truth," Freeman says in the report. "When it comes to implementing diversity, size shouldn’t matter. The bottom line is that firms must view the accelerating diversity of the workforce as an opportunity and embrace it."

Freeman recommends outreach programs and internships to promote diversity. "Implementing diversity strategies must start at the top and include the C-suite and the board of directors," the report states. "To be effective, these initiatives must then continue to get buy-in at each level within the organization."

  • Company culture matters.

Culture shouldn't just be an HR buzzword, the report cautions. Indeed, "it is a key selling point for companies on the hunt for talent.” Fifty-five percent of survey respondents said they would remain at a firm with a great company culture even if the compensation wasn’t as competitive. Conversely, the primary reason most executives said they left their firm in 2015 was a deteriorating company culture.
Firms should perform an honest assessment of existing company culture, as well as solicit feedback from candidates about their perception of the culture, Freeman says.

  • Leadership is critical.

Highly regarded leadership is both a key selling point in today’s market and a very effective retention strategy, according to the "Talent Trends" report. "Top-tier talent will determine quickly whether to seriously consider a firm based on the quality of the executive team" the report states.
What qualities are most valued in a leader?

According to the survey, wealth management executives are looking for a leader who motivates and inspires, demonstrates ethics and integrity and has a clear vision for the company.      

Source: Kathy Freeman Co.

"Executive teams who actively inspire, build trust, and create transparency will be the winners in the talent sweepstakes." the report states. "Management teams that have a high degree of emotional intelligence will have an advantage in this market. Those that don't will face challenges."

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