RECRUITING ADVISORS:
AN ONGOING PROCESS
Sales Management
Robert F. Grieb

Robert F. Grieb is a Managing Director of the BISA He developed and manages the BISA Sales Management Best Practices Workshops, and works with financial institutions to enhance their investment and insurance programs and overall sales culture.

Email: Robert F. Grieb

 
 
 
 

AT THE BISA Community & Regional Banking Forum in September, executives from a wide variety of institutions participated in a series of roundtable discussions on various topics, including current regulatory and compliance issues, building market share, program integration issues, and product versus (planning) process sales.

One of the liveliest discussions, facilitated by Frank Consalo of Fulton Financial Advisors, was on the issues and opportunities related to recruiting new advisors. The intensity of the discussion reflected the importance of this topic to virtually every organization. I have covered the topic of "building your sales force" in previous columns (Winter 2006 and Spring 2006). For this issue, I will focus on some of the practical ideas that were shared in the roundtable discussion.

One of the first points mentioned in the 'recruiting' session was the importance of keeping your existing reps. Recruiting advisors effectively is a time-consuming task. If you lose good advisors, replacing them can significantly add to your required effort. Further, if you are losing reps that you would prefer to keep, that in itself could be an indication that your program has problems that need to be addressed.

Before you begin looking for new advisors, it is important to define the characteristics you are looking for in a rep. This includes things like prior experience, sales records, past compliance and personal financial issues, attitude and personal attributes, among others. Once you have defined these, stay with it. If you begin to deviate from this, you could jeopardize your program.

Keep a 'top 10' prospect list and treat these people with particular attention—much like an advisor segmenting his or her book.

Second, be prepared to "sell" your program to prospective advisors. Understand and be able to clearly (and convincingly) articulate the relative strengths and benefits of your institution, program, and the available position. Consider creating a document you can give to prospects or a "Brainshark"-type presentation.

Recruiting sources

Roundtable participants had mixed experiences with recruiters. Some found them to be relatively ineffective, while others found them quite helpful. If using a recruiter, it is important to provide them with clear direction regarding your minimum requirements, and stick to them. Experience has shown that if you allow a recruiter to push a candidate who doesn't meet your criteria, the bar will be lowered moving forward. Be explicit as far as the experience required, as well as previous GDC, type of firm, U-4 marks, etc.

Several managers had found the website www.stockbrokershop.com helpful to identify advisors in a given market. Another approach is to screen your personal mail for financial seminar offerings and call advisors who send invitations. Referrals from existing brokers are generally positive, and many use various types of incentives to encourage referrals. Wholesalers can be a good source. They often know which brokers are truly unhappy in their current position and would like to move. They will also have some perspective on the quality of the broker—but note that their opinion may be skewed based on how much of their product an individual sells.

Some managers have had success just calling a local brokerage office and asking for an advisor. Once connected, they build a rapport and eventually learn who in the office might be interested in leaving. One of the more creative approaches discussed was looking at ACAT (Automatic Customer Account Transfer) reports for accounts leaving your firm and going to another. It was suggested that managers might contact the new broker of record, introduce themselves and start building a relationship.

A continuous process

Another fundamental point stressed in the session was the fact that successful recruiting is a continuous, ongoing process. Many view it as a periodic task to be performed when the need for a new rep arrives, yet many emphasized the importance of continually looking for advisors, even when you don't have a current opening.

In most situations, the process starts with some form of networking, then relationship building before direct recruiting. Managers should also build and maintain a list (database) of all advisor prospects contacted or screened. This allows you to keep track of prospects over time. It can also be a basis of negotiation with a headhunter should he or she present a candidate with whom you have already established contact and some rapport.

The recruitment of a specific individual may extend over a long period of time. Your initial contact may be very preliminary—more of a "getting to know professionals in the area." You should keep a "top 10" prospect list and treat these people with particular attention—much like an advisor segmenting his or her book. Get to know them on a personal basis. Keep regular (at least quarterly) contact, which may be on a personal or business basis. Sometimes, just call them with a good sales idea. Note that an advisor's situation can change; with quarterly contact, you will know if something has happened that might increase their interest in coming to your firm. Another suggestion was employing Google maps to literally view their house and neighborhood. This can help you better understand their personal situation.

In most cases, advisors coming from other bank programs will not be able to pro-actively move accounts.

It is important to learn about any FINRA-related issues an advisor might have as early in the recruiting process as possible. You should ask about it in your first meeting and/or check the public information on the FINRA website. If it appears there may be "issues," you should get the rep's permission to review the "private" information in FINRA's CRD (Central Registration Depository). This can be done without any notification to his/her current employer. By doing this, you can determine early in the process if there are issues that might not be acceptable to your broker/dealer or bank.

Finally, when you get down to direct recruiting of an individual for a specific position, treat it like a courtship. Differentiate yourself based on the level of personal interest you show. If you have been building your "database" over time, you should know key dates like birthdays and anniversaries, information about their children, personal interests, etc. Use these. Look for ways to connect with their spouse if appropriate. This can really differentiate you from other current or perspective firms.

Hiring and 'on-boarding'

It is important to have a good understanding of expectations regarding an advisor's ability to bring along clients/accounts. Firms take different approaches to non-compete issues. Some are very stringent; others less so.

In most cases, advisors coming from other bank programs will not be able to pro-actively move accounts. On the other hand, many wirehouse and independent firms have signed a common "Protocol" agreement that, if followed, will allow advisors to solicit their former clients. It requires that your institution join the group as well, but this can be done at the bank level and does not require the commitment of your broker/dealer (TPM) for their entire business. Under this Protocol, when an advisor leaves a firm, he/she must provide the old firm a list of all their clients, including account numbers. The advisor may then take a list of the clients, including contact information, and solicit them from the new firm. The advisor may not take account position information or account numbers.

When considering this option, is it important to understand that, should you join the Protocol, advisors leaving your firm will then have the same option. Note that the Protocol is only in play when both firms are members.

There was no consensus among roundtable participants as to the 'best practice' for new-hire incentive compensation. Some favored "forgivable loans" based on the trailing 12 months' commission or the first 12 months' commission in the new job. Other approaches discussed included enhanced commission for a period of time, enhanced commission on accounts brought over from previous firms, and forgivable draws during the transition period. Most managers had some sort of enhanced compensation to help attract new advisors and/or help them through a transition period.

In addition to compensation, managers used different approaches to help integrate the new advisor and raise their production level as quickly as possible. These ranged from intensive one-on-one coaching efforts by managers to using current advisors as mentors or "buddies." In the latter case, the mentor sometimes receives a small commission override for a short period of time (3 to 6 months). This is especially effective when the mentor knows the new advisor beforehand.

One last point that was discussed was the "emotional roller coaster" that many new advisors find themselves on. After an initial 'positive' period, many advisors find themselves questioning their decision as they work to learn new systems and sets of rules and struggle to integrate themselves into the milieu. Be prepared for a period of 'buyer's remorse' on the part of the new advisor after a few weeks on the job. If you have done a good job of recruiting, however, you can be confident that this will pass fairly quickly.

The costs

It is important to understand the full cost of bringing on a new advisor and the time and revenue requirements to justify it. Costs may include a recruiter, incentive compensation, office start-up expenses (laptop, Blackberry or mobile phone, furniture, etc.), and training expenses (which might include T&E expenses paid to your TPM's office). One cost that is often overlooked is the expense of moving customer accounts. ACAT costs can be as high as $125 per account, and many households will have three or more actual accounts. Many programs waive the first year's fee for a new customer's cash management account (CMA).

ll together, the cost of moving a seasoned advisor's book could reach close to $50,000. This is in addition to recruiting, "signing bonus," and direct expenses. Some firms charge a portion of this back to the advisor. If that is the case, be sure it is clear upfront. It could put the advisor in a significant hole before he or she has a chance to generate much income.

In closing, while there are many good "tactics," there is no single best way to recruit new reps. Two principal keys to success, however, seem to be to view recruiting as an ongoing process and to attack it in a structured manner.