Bank-owned firms still the best place for rookies

Indeed, rookies are in short supply at firms such as Toronto-based GMP Private Client LP and Winnipeg-based Wellington West Capital Inc. that hire only seasoned professionals who can walk in the door with established books of business. Rookies might get hired on as assistants to experienced advisors at the independents, but it’s the bank-owned dealers that bear the brunt of educating the next generation of investment advisors.

Among the six bank-owned dealers, 500 to 600 rookies enter the advisory profession each year.

But not all of them stay. Survival rates vary, with Toronto-based TD Waterhouse Private Investment Advice leading the pack; 74% of the 80 to 100 recruits entering its four three-year programs each year are still there at the end of it. Toronto-based ScotiaMcLeod Inc. sees 70% of its rookies graduate from its coaching program, whereas Toronto-based RBC Dominion Securities Inc. sees about 50% of its 100 rookie recruits remain within the firm after three years.

But, says DS national director David Agnew, the accuracy of these numbers depends on how “survival rate” is defined. “We have people who join larger teams. We have people who, after a couple of years, join branch management,” he says. “When you factor that in, it’s 50%. But if you factor in people who started with us, who are still in the President’s Club and beyond, working on their own, it’s 35%.”

(DS’s President’s Club is designed for advisors who are in their first three years in the business.)

Typically, rookies are in their early to mid-30s and in their second or third careers. Generally, they are expected to train for about three years. For the first 15 months, they receive a salary; after that, a chunk of their revenue is commission-based.

At TD Waterhouse, rookies receive a fixed salary of $50,000 for the first year or so. But they are also expected to gather $10 million in assets in that period.

“If they are successful in meeting that criteria,” says Mike Reilly, TD Waterhouse’s president and national sales manager, “and are out hunting and bringing in the numbers as expected, they become eligible to work with a retail bank branch, which is a huge upside.”

Because of the good relationship the brokerage arm has with the retail banking division of TD Canada Trust, TD Waterhouse seems to be the “it” place for industry freshmen.

The smooth integration of all sectors of the bank appears to result in constant referrals of clients to the investment dealer from the bank branches — or, as one TD Waterhouse advisor in Ontario says, “Clients trickle in through referrals.”

Out of 50 TD Waterhouse advisors surveyed for Investment Executive’s 2008 Brokerage Report Card, 23 cited smooth integration of company departments as the best aspect of working at TD Waterhouse or the reason they would recommend it to another advisor.

Of course, it is in the firms’ interest to retain as many rookies as possible, and the firms all have programs like DS’s President’s Club that keeps the rookies talking to one another. TD Waterhouse, for example, organizes a rookie reunion after 15 months, which is when the commission part of revenue is expected to kick in.

ScotiaMcLeod, too, recognizes the importance of rookies sharing ideas: “We have our executive council in Toronto,” says Hamish Angus, head of ScotiaMcLeod, “which allows them to reconnect with their peers and see what’s working for people and how others in their position are successful.

“It also gives us a chance to reconnect with them,” he adds, “and make sure they’re getting all the support they need.”

But what about the retail boutiques? Do they suffer from a shortage of fresh ideas by hiring only veteran advisors?

GMP CEO James Werry doesn’t think so. GMP advisors, who also own equity in the firm, are building an elite brokerage house, he says. The standard is to hire experienced brokers who produce a minimum of $1 million in gross revenue annually. But less seasoned advisors can learn the business in a very hands-on way by joining the team of an experienced producer.

@page_break@”These people, over time,” Werry says, “can easily grow into positions to transition and take over someone’s book.”

These “mentoring” programs may be noticeably shorter than rookie training programs, he maintains, but they are no less successful in training advisors. IE