Wealth management firm explains how it bucked the trend with a 90% retention rate
Why are some firms able to keep junior financial advisors in the fold while others repeatedly watch them wash out?
The failure rate among rookie advisors was more than 72%, according to a recent report from Cerulli. The study shows financial advisor head count grew by just 2,579 advisors in 2022, with the number of new advisors entering the business barely offsetting retirements and trainee failures.
Sure it’s a tough business, but there has to be a better way to grow and retain talent. Right?
Maybe Baird has the remedy, or at least a recommendation, considering that its financial advisor training program has had a 40% retention rate since inception of the program in 1991 and 90% retention of next-gen financial advisors over the past five years.
The rotational program, located in Baird’s Milwaukee headquarters and select branch locations, lasts up to two years and is open to individuals with three-plus years of sales or related experience and a college degree.
“This program is by invitation only, meaning an experienced financial advisor needs to indicate or agree to bring on a new junior teammate,” said Anita Volk, next generation talent manager in Baird’s private wealth management business. “There are no surprises, these teams understand the benefit of having a multigenerational team, and the diversity of thought that it can bring to the way they service clients.”
During the due diligence process and throughout the five-month training, Baird makes sure the senior partner of the team the candidate will be joining outlines clear expectations around what success and top-tier performance will look like.
Some teams include some production goals, while others might focus more on the candidate servicing clients, giving clients more in-depth estate planning resources than they previously could or perhaps bringing forward a handful of new relationships.
“These candidates are so meticulously vetted that it’s a program meant to set them up for success, not failure,” Volk said.
Of course, if associates don’t pass their licensing tests, they are released from the program.
In terms of monitoring progress, trainees’ goals are written into their teaming agreement, and senior financial advisors and branch managers meet with the trainee every quarter in addition to their day-to-day interactions in the office.
“We don’t want FAs to babysit, but the trainees know they have resources surrounding them,” Volk said.
GOODBYE, GORDON GEKKO
For Paul Saganey, president of Integrated Partners, the road to retention begins with the 3 C’s: culture, conversations and a commitment to one another.
“If we find a new financial advisor who is a cultural fit, success is the result,” Saganey said. “We love to converse with new advisors and help them to understand our vision and values. Armed with this foundation, and commitment to the other members of the team, they know they can ask questions without impunity and know that we are all working together for growth and success.”
To make sure its new and junior advisors stay on track, Integrated works with them to establish key performance indicators that are dependent on their individual skills and expectations.
“Expecting a young advisor to be a rainmaker is unfair. The RIA industry has grown beyond cold calling and into holistic planning,” Saganey said. “Few young advisors get into financial planning to be salespeople. No one wants to be Gordon Gecko. They want to be helpers. We want to help empower that.”
Dimple Shah, executive vice president of corporate strategy at Osaic, maintains that a clear strategy under the apprenticeship model helps new advisors understand how and where to focus their efforts and where the practice is headed. In her view, it’s the organization’s job to ensure that senior advisors have sufficient bandwidth to mentor and apprentice the junior advisor that has joined their practice.
“The strength of the apprenticeship relationship is the most influential driver of the success of junior advisors, particularly within independent practices,” Shah said.
FAILURE IS STILL AN OPTION
If a junior advisor doesn’t have a built-in referral network, it typically takes at least 18 months to two years for them to see meaningful results. Advisors need to understand that and recognize it’s a long learning curve.
That said, the junior and senior advisor will likely have a good sense of whether the junior advisor is on the right track fairly quickly based on their personal and professional chemistry.
“The key to evaluating success is whether the senior and junior advisor have an agreed set of weekly or monthly activities that will, over time, lead to sales success and an accountability and evaluation construct to evaluate progress and course-correct where necessary,” Shah said. “If so, then the junior and senior advisor likely have a good sense of whether the junior advisor is on the right track within the first six to eight months.”
Sandra Cho, president of Pointwealth Capital Management, says investments in people are no different than investments in stocks, which sometimes must be offloaded if they’re heading in the wrong direction.
“Our goals are long term, and as long as there is substantial progress toward personal and professional goals, we will provide the resources and support to grow our people,” she said.
Cho says another best practice for retention success is getting out of the office and getting to know the junior advisor.
“It’s important to check progress on a regular basis. We do daily check-ins to see capacity level, weekly team meetings and biannual reviews,” she said. “Most importantly, we get together and share a meal about once a month. When you eat, sometimes things come out and don’t just go in.”
