Recruiting the next generation

Over the next 10-15 years, these retiring advisors will create a shortage of talent unless new blood is recruited to replace them.

Most advisors know they should have a succession plan in place — a junior advisor who will take over the practice when they retire, or plans to sell their book to a younger advisor.

At the corporate level, the traditional “build” strategy — recruiting, training and developing younger advisors to move up the ranks — is less common than it once was, thanks to shrinking resources and a belief by some that it’s not necessary to take extra steps to find new advisors. That’s why many firms now leave recruiting to their advisors.

DundeeWealth, for example, recruits only advisors who have 10-15 years of experience and a solid book. Those advisors may recruit younger associates to work with them, but nothing is done at the corporate level to attract young talent. Some firms, says George Hartman, CEO of Toronto-based Market Logics Inc., can’t justify the expense of recruiting rookies.

So, what is the industry doing to address the impending exodus? Although few firms are willing to incur the costs of recruiting and training young talent, some industry players are taking steps to fill the gap left by retiring industry veterans.

Educational institutions

A number of colleges and universities across the country offer diploma and degree programs specializing in financial services, and several firms still offer significant training to these graduates.

Over the past decade, educational institutions have been taking on more of the training previously carried out by the industry. Colleges are making a greater effort to stay abreast of what’s going on in the industry, says Terry McCullough, professor and co-ordinator of the financial services program at George Brown College in Toronto. Industry representatives now sit at the table with education providers to ensure curriculum is in line with industry needs.

And the industry is taking note of students. For example, the George Brown program held its first career job fair last year. Of the 90 students who attended, 19 landed jobs, McCullough says.

For the past two years, the Canadian Institute of Financial Planning has held its Case Challenge competition for college students, in which teams prepare financial plans for an original case study devised by the CIFP. Last year’s competition, held in November and hosted by Centennial College in Toronto, expanded to include student teams from several Ontario colleges. The CIFP hopes to expand the project across the country.

This kind of initiative is vital to the industry because it shows executives at the major firms the talent that is available and connects employers with that talent, says Keith Costello, CIFP president and CEO. However, Costello admits, more needs to be done to attract young blood to the field.

The CIFP, for its part, provides free memberships to students so they can start networking with people in the association.  Similarly, Advocis offers a discounted fee for new advisors. For the first five years in the industry, rookies pay one-third of the professional association fee, according to Greg Pollock, president and CEO of Advocis.

“This brings them in,” Pollock says, “gets them involved and they then have the opportunity to mentor with senior advisors.” Advocis also promotes networking events such as “Under 5/After 5,” in which advisors with less than five years of experience meet after 5 p.m. on a regular basis to discuss the challenges of the industry. They often invite veteran advisors to share their experiences.

Some firms are doing their part as well. Winnipeg-based Investors Group Inc. reaches out to potential recruits through referrals, career forums, university and college fairs, seminars and social media, says Vas Pachapurkar, the firm’s area vice president for Ontario. The recruits — both young graduates and older candidates in a second career — enter the firm’s associate program, where they learn the ropes under a seasoned advisor. That program is successful, Pachapurkar says, because the associate has time to learn the senior advisor’s business and get to know the clients before the transfer takes place.

“It’s not abrupt,” Pachapurkar says. “Clients see the progression happening over a few years.”

Development program

Toronto-based BMO Nesbitt Burns Inc. has taken steps to ensure that it always has a stream of younger advisors to take over retiring advisors’ businesses with its investment advisor development program. The program, which has been around for almost two decades, trains about 75 rookies each year.

According to Bill Brown, the firm’s senior vice president and managing director of national sales, advisors in Nesbitt’s development program come from a variety of backgrounds and many are being sourced from bank branch financial planning roles. Nesbitt’s development program pairs a developing advisor with a mentor for 18 months. During that time, the junior advisor is introduced to the bank’s technology, research and products.

“By the time they exit from the 18-month training program,” Brown says, “they have what they need in terms of the tools and knowledge to go out and build a practice themselves.”

This year, Nesbitt launched a new compensation model for the program, which blends a base salary, commission and asset-gathering bonus during the first year of training.

Toronto-based Bank of Montreal is promoting financial advisory careers specifically to younger women, says Karen Hartley, senior vice president of recruitment and intake at BMO. The career flexibility of advisors can be appealing to women, especially as they start families, Hartley says, but there is a need to get the word out. The bank holds sessions, in collaboration with Women in Capital Markets, to educate women about the financial advisory career path and what it entails.

In addition, the bank’s campus recruitment team is assigned the role of sharing information with young graduates. Candidates are rarely recruited directly from campus into the advisory program, Hartley says, but planting that seed is important.

Some financial planning firms are also doing their part to bring in new talent to replace retiring senior advisors. 

Rogers Group Financial Ltd. in Vancouver has succession planning written into its business structure. It mandates that all shareholders (that is, all the firm’s advisors and its chief operating officer) begin selling their shares back to the firm at age 60, winding them down completely by age 70.

“You don’t want people in the twilight of their careers making decisions for the firm over the long term,” says Clay Gillespie, Rogers Group’s managing director.

Rogers Group also runs an articling program, under which it hires one candidate  each year and takes that person along a training path. The trainee moves from assistant to associate and, finally, advisor. Gillespie was the company’s first articling student in 1992.

Although it’s not required that every senior advisor at Rogers Group take a rookie under his or her wing, Gillespie says, everyone so far has embraced the concept because it works well for all parties. The senior advisor gets an enthusiastic, young associate. And the recruit gets a career opportunity. If all goes well, recruits will put in their time and develop clients or purchase books of clients.

Gillespie built his business in that manner and now has two associates working for him. “It makes a world of difference,” he says. “I try to do less and less every day.”

Hartman recommends this kind of graduated approach to succession planning. “If you wait too long [before putting a plan in place],” he says, “the pickings become slim.”

Uphill battle

From the aspiring advisor’s point of view, getting that first job can be an uphill battle. New candidates face more intense educational requirements, stiff competition and a higher debt load than their predecessors, says Jeff Gallant, 22, a recent graduate from Queen’s University School of Business in Kingston, Ont., who has been working at Gluskin Sheff & Associates Inc. in Toronto as an investment management analyst for less than a year.

Landing that job, Gallant says, wasn’t easy. While earning his commerce degree, he took a few days out of his schedule every few months to visit Toronto and speak with professionals in the investment industry about the playing field and any knowledge that might give him the edge in looking for a job.

Gallant couldn’t rely on traditional campus recruiting initiatives, he says, because these efforts usually focus on careers in investment banking or sales and trading, while he was interested in a career in wealth management.

Young entrants such as Gallant lack the  experience to launch their own practices. But forming a relationship with a senior advisor can have its risks.

“Many advisors hire associates under the guise that they’ll help them and that there’s a partnership,” says Mark Toren, human resources consultant with Altura Search Partners, a Toronto-based recruiting firm that specializes in asset management professionals, “but [a partnership agreement] is never written down.” Many young advisors approach Altura after three or four years in such an arrangement, claiming that the advisors “sold them on a promise and didn’t deliver on it.”

But, Toren adds, a senior advisor with a lucrative book is also taking a risk in entering such an arrangement. Some junior advisors simply don’t make the grade and have to be sent packing. 

Although the large firms claim to be reaching out to university students, Gallant would like to see them do more. He says students should have greater opportunities to see what alumni and recent grads are doing in their financial services careers. Those students may not be aware of the various career options available to them.  IE