Acute Shortage Of Top Advisors
March 25, 2013 by Charles Paikert
If you haven’t had to fill any vacancies in a while, your next job posting may offer a rude awakening.
Recruiting and hiring experienced, client-facing advisors with ultra high-net-worth experience is extremely difficult right now, with demand high and supply low, say a number of executive search specialists.
Although the job market for all advisors is robust, the talent shortage among firms catering to extremely wealthy clients is particularly acute. That’s good news for advisors, but a problem for firms hoping to expand. “The higher up you are on the food chain in terms of the size of your clients and the size of your business, the more choices you have,” saysDanny Sarch, president ofLeitner Sarch Consultants.
A recent study by the Family Office Exchange cited “the relative scarcity of top-tier client facing talent” as a “key operational challenge” for multi-family offices and wealth advisors.
The talent drought is causing firms to pay more, take more time to fill positions and consider giving equity to new hires, according to executive search and wealth management executives. The tight market is also forcing high-end wealth firms to start grooming younger, less experienced relationship managers.
ACUTE SHORTAGE
While a shortage of top client-facing talent is a perennial problem for high-end wealth advisors and family offices, the market is particularly constricted this year, say industry executives.
While the economic recovery has improved equity markets and increased assets under management, firms have also been making a greater effort to retain their experienced relationship managers. That has further constricted the job market, as potential candidates say they have stopped looking around.
In fact, less than half of executives surveyed last month byKathy Freeman, who heads an executive search firm inSan Luis Obispo, Calif., said they would “consider an opportunity” outside the firm they currently work for. That’s a stunning drop of 30 percentage points from the 78% who answered that question affirmatively in 2009.
SOARING COMPENSATION
Total compensation for top client-facing talent is now nearing$1 million, industry sources say; even below that top tier, firms serving the wealthiest clients are now paying$400,000 to $800,000. And executive searches for those candidates now frequently take six months and beyond, up from two to three months, according to recruiters.
“The market for those who have the complex set of skills necessary to work with high- and ultra high-net-worth clients and wealthy families has expanded and the development of talent has not kept up,” says Freeman, who specializes in finding client-facing executives for wealth managers around the country.
To attract talent, firms will need to “offer equity more frequently and act more decisively than they have in the recent past when a compelling candidate has been identified,” according to Freeman’s 2013 survey,Attracting and Retaining Human Capital.
In fact, Freeman says, clients sometimes prefer equity to up-front compensation. “People are willing to step back in cash to get equity and a bigger piece of the payout down the line,” she says. “But it’s not just about economic opportunities. These executives want to believe in a company and its vision.”
In addition to offering more money and equity, family offices and wealth management firms are also offering potential hires forgivable loans and more freedom on the job, saysJane Swan, the former head of search firm giantKorn/Ferry International’s wealth management division.
“It is a sellers’ market, and relationship managers are looking for independence and access to the right investment solutions as they service their clients,” says Swan, who is currently setting up her own firm.
Firms also need to move fast when they find the right candidate, warns Freeman. “If the right fit comes along, they can’t just sit there,” she says. “There aren’t going to be two or three other candidates who are just as good right behind them.”
MIDMARKET ADVISORS
Advisors serving less affluent clients can also bargain from a position of strength, saysMindy Diamond, president and chief executive,Diamond Consultants.
“If someone generates$700,000 in revenue and has$100 million in assets, their transition package won’t be as large,” Diamond says. “But it’s still a sellers’ market for them.
“There isn’t a firm around who wouldn’t want to hire that person if their assets are growing, their compliance record is clean and they are a quality individual,” she adds.
For high-end firms, however, the job requirements are even more restrictive. “People we can comfortably put in front of a billion-dollar family and their legal, tax and banking advisors and not have to worry are extremely rare,” saysGreg Curtis, chairman of Greycourt & Co., a family office inPittsburgh with$10 billion in assets under management and an average client size of approximately$160 million in investable assets.
“Talent has always been the limiting factor in the growth of a firm like Greycourt,” Curtis says. “We interview about half a dozen top people a year, get far down the road with one or two, and almost never close the deal.”
DEVELOPMENT STRATEGIES
Some high-end firms, such asManchester Capital Management, have begun in-house programs to train younger advisors to assume more sophisticated relationship management skills.
Manchester has made a point of bringing in bright young professionals in their mid-20s, often at the recommendation of clients, saysMurray Stoltz, president of theNew York firm. The firm puts these “next generation” advisors on teams where they can observe senior executives and begin to interact with clients.
By the time advisors are in their early 30s, Stoltz says, they are “pretty capable” and ready to “ramp up to the next level” to take on client-facing responsibilities. “It’s proven to be a very powerful program and mutually beneficial for everyone.”
The shortage of experienced talent has also pushedGreycourt to “grow our own,” says Curtis.
“We typically hire someone with an MBA and/or a CFA who already has about five years of experience, then train them in-house,” he explained. “The result is that we currently have four generations of client advisors.”
He explains the breakdown: “G1 and G2 include me, our CEO and the majority of the members of the management committee, guys in their 50s. G3 are younger advisors in their 40s who work with smaller clients or back up more senior advisors on larger accounts. And G4 are people in their 30s who sometimes attend client meetings but are mainly competing to become client advisors.”
