Advisory Firms Must Rethink Their Hiring Philosophies

Even if colleges ramp up degree programs in financial planning and related fields, advisory firms are going to have to rethink their hiring philosophies to meet the growing demand for investment advice, industry representatives and academics say.

Deena Katz, an associate professor of financial planning at Texas Tech University, argues bluntly that advisory firms can no longer expect to hire only seasoned mid-career professionals with an established book of business. "The model's broken," says Katz, who spoke on a panel at the FSI OneVoice conference in January. "Hiring people to start producing … from Day 1 isn't going to happen anymore."

Much of the new-gen challenge involves demographics. Kim Della-rocca, Pershing's chief of segment marketing and practice management, cites industry reports projecting that 25% of advisors are planning to retire in the next decade, meaning that the industry will need some 237,000 new entrants to replenish its ranks.

"We are really worried that there simply aren't enough financial advisors to serve the number of investors who want high-quality advice," Dellarocca says. "Our businesses need to be about longevity and sustainability."

RECENT GRADS

Too often, advisors dismiss the value that recent college graduates can bring to a practice. At Texas Tech, for instance, financial planning students must complete a residency program before graduating. They also gain broad exposure to many of the technology programs that firms use. "They can run almost any software package you want," Katz says.

To be sure, Texas Tech has a prestigious planning program and may not be representative; despite the growing total, planning programs vary widely. But the field, as an academic discipline, is growing, and the CFP Board is working to help develop and certify new programs that will produce the next generation of advisors – if planning firms are willing to hire younger.

"I think this is one of the biggest issues facing our industry that no one wants to address," says Brian Nelson, vice president of advisor programs at National Financial, a Fidelity Investments company.

At the FSI conference, panelists urged advisory firms to work more closely with local colleges – offering internship programs, dispatching advisors to visit campus business clubs, delivering guest lectures or teaching adjunct classes.

In a survey Pershing commissioned last year, 96% of college students said they had heard of the advisory profession, but just a quarter said they were "familiar" or "very familiar" with the field, and only 7% said they were interested in a career as an advisor.

"If we're not focused on the people who are graduating with these degrees and we're not aware of the programs, they're certainly not aware of us," Nelson says.

Kenneth Corbin is a Financial Planning contributing writer in Washington.