- Strategies around attracting, training up, and holding onto financial adviser talent are changing.
- A wave of US advisers are expected to retire in the coming years, and many firms are ill-equipped to fill their shoes with newbies, according to the industry research firm Cerulli Associates.
- Business Insider reviewed training outlines from some of the world's largest wealth managers and spoke with executives about how new financial advisers are trained; how their programs have changed over the years; and how people joining their programs today can succeed.
- Succeeding early on as a financial adviser is notoriously difficult. Around three-quarters of adviser trainees in the industry exit the business during their first year, according to Cerulli data.
- Visit BI Prime for more wealth management stories.
The wealth management industry's strategies around drawing in, training up, and holding onto financial advisers has reached an inflection point.
A wave of US advisers are expected to retire in the coming years, and firms need to fill their shoes with newbies who can take on retirees' clients and their assets, according to the industry research firm Cerulli Associates. The average financial adviser's age is 52, the firm estimates.
While firms' adviser headcount, productivity, and client assets can be top-of-mind for investors, executives, and analysts, complex layers of training for new advisers are powering the next generation of talent behind the scenes.
To report the most comprehensive look at how firms are preparing for that retirement cliff and what their training looks like, we interviewed leaders at UBS, Morgan Stanley, and Merrill Lynch about how new advisers are trained up; how their programs have changed over the years; and how advisers joining their programs today can succeed.
Succeeding early on as a financial adviser is notoriously difficult. Around three-quarters of adviser trainees in the industry exit the business during their first year, according to Cerulli data.
Morgan Stanley, Merrill Lynch, and UBS declined to provide their adviser trainees' graduation rates.
Merrill Lynch
Bank of America's wealth management business touts adviser training as one of its biggest strengths for more than 70 years, back to when formal training was developed in the 1940s.
These days, the wealth manager is grappling with the same aging adviser force as its rivals. It's opened up more capabilities and tweaked features of its main training program in response to a fast-changing pool of talent.
For instance, we first reported last fall that advisers-in-training who exited the trainee program without becoming full-fledged advisers were more commonly transitioning to other roles within the firm instead of leaving altogether. It underscored how even the most traditional firms are opening up different career paths.
It's also adjusted compensation levels to stay competitive.
Andy Sieg, the head of Merrill Lynch, said in an interview with us last October that the firm's 3-1/2-year-long financial adviser development program (FAPD) graduation rates are "not as high as we would like." Earlier in 2019 the firm hiked trainees' starting salaries by $10,000 to an average of $65,000. It's also deployed 75 performance managers around the country to coach them, tracking things like how many meetings they have with potential clients.
Merrill Lynch sets out to recruit fresh talent on college campuses, and began hosting virtual career events — where representatives and prospective trainees can connect live — about two years ago. This quarter, it's also begun rolling out job preview videos to present to candidates throughout the hiring process with the hope that it provides a realistic view of what advisers' days are like.
Typically, a recruiter will interview a candidate and then connect them with a hiring manager, and from there a candidate will head into their local branch for a more detailed interview with several people. That might mean speaking with an adviser to get a feel for the role, as well as someone in management there.
Then comes a candidate's crucial business plan presentation — and at this point, their training program hasn't even started yet.
The candidate will go in to see a hiring panel of three people, typically a FADP performance manager, a local market executive, and a financial adviser.
Jennifer MacPhee, the firm's national FADP performance executive, said that in what amounts to a "deep-dive interview," the candidate lays out their business plan, receives live feedback, and from there usually hears back quickly thereafter about their decision to bring them aboard as a trainee.
The business plan is all-important because it's a launching pad of sorts for executives to assess and gauge whether the candidate could see real success at the firm. Candidates might describe a niche market, group, or alumni network they're planning to tap into for new clients, and how they plan to win that business.
The business plan is personal. One of the plan's sections for candidates to complete is laying out what they like to do — making it easier for the firm to gauge, for instance, whether someone who likes financial planning may immediately suit a team well that's in search of a financial planner at the moment.
If a candidate doesn't get a recommendation to move forward from the hiring panel they met with, they may have a chance to revise their business plan with feedback from the panel.
"I've absolutely had situations where they had a lot of the core components, but they needed to really get a little bit more specific on tactics," MacPhee told us. "And we gave them feedback, we gave them a chance to enhance their business plan; they came back, took the feedback, did a great job, and we gave them an offer."
At different points throughout the interview process, Merrill Lynch might refer candidates for different roles if they feel like the talent would be better suited for a different opening, too. The firm also offers a team financial adviser (TFA) route within the wider training program, where advisers might choose to enter into the firm through a specific need that an advisory team has.
Having more junior additions on the team could make more senior advisers more productive. While the entire FADP population is about 3,300 people, some 25% of its population is in its TFA program.
Whether a candidate is taken onto a team from the program's outset, or continues as a sole practitioner, each has to go through its highly intense 30-week beginning phase of training that kicks off with licensing.
That comes with a study routine and dedicated licensing coaches. By the fourth week of training, adviser trainees are scheduled to take their standard Securities Industry Essentials (SIE) exam, which is published by Finra; by the ninth week, they're set to take the Series 7 exam; by week 13, they're taking the Series 66.
Once candidates have passed those exams and have completed training and internal assessments, they can begin engaging with prospective clients.
Candidates are monitored on a regular basis in their local markets. They have monthly goals for themselves, as well as parameters to stay in the program. Managers check in on metrics like how many meetings and networking events they're going on, and how many new people they've connected with.
Through the three years that follow the rigorous, initial 30-week foundation, the firm aims to educates the trainees on a deeper level around everything it offers. Wirehouses like Merrill Lynch, of course, try to keep as much of a client's financial life inside the firm, rather than seeing them doing business with a competitor in a different area.
Ultimately, MacPhee said, the main qualities the firm looks for include resiliency and a strong work ethic, as well as abilities to take coaching and be dynamic if something isn't working at the first go.
Morgan Stanley
Wealth management has been a key component of Morgan Stanley's evolution since the financial crisis. The business, now with some $2.7 trillion in client assets through Dec. 31, is "clearly stabilizing the firm," chief executive James Gorman said on a quarterly earnings call in October.
Now, the firm is taking steps to improve its financial adviser associate (FAA) program, with an aim to better equip new advisers. Jeff Tucker, the head of FAA sourcing and development who joined the firm in 2017 after about a decade with Merrill Lynch, said his team has spent the last year considering how to best execute on that.
For instance, this year the firm is rolling out trainee "roadmaps," or guidelines on how they can build up their own practice before they begin to run into challenges.
"Where I think the industry has done a poor job in the spirit of trying to respect the entrepreneurial spirit of advisers is, I think we've overshot and had the pendulum swing too far to the other extreme to where we don't provide enough prescriptive direction early on," Tucker said.
Morgan Stanley calls its FAA program "intensive" — a three-year-long training and development program that comes in addition to an initial four-month pre-production program. From the outset, the firm encourages new trainees to think about their target markets, what might set them apart, and whether they can harness groups and associations for prospective clients.
"We don't expect a new adviser to have all the answers," Tucker said, though they are expected to demonstrate a baseline knowledge around the industry, and whether they understand the career's rigor.
"You have more advisers leaving the industry than we've been able to attract, and at the same time, you have wealth being created at a rate faster then we can even pursue," he told us.
The firm will consider a few things, like candidates' ability to pass exams and their understanding of what goes into actually being an adviser day-to-day. From there, they complete a series of interviews.
The first is a video interview with the internal recruiting team. If they pass that, then they move into the pipeline of their local complex, where local leadership picks it up from there, brings the candidate in, and completes the interview, business plan, and evaluation process.
Only then is a candidate's hiring decision made. The first stage is a four-month, pre-production period, when the firm is helping FAAs get started with licensing, business plan formation, and educating on everything Morgan Stanley offers clients.
"Business planning is a life cycle. It's not an event," Tucker said. "The most successful financial advisers, whether you're 20, 30 years in the industry, are always updating that business plan because it's a living, breathing document."
He likes to think of the three years that follow the initial preparation period as building upon one another — first doubling down on skills and going through coaching support "not dissimilar to a bicycle, having training wheels, and then you reach a point where you no longer need the training wheels."
We don't expect a new adviser to have all the answers
In an FAA's third year, they may have ramped up to a point where they're seeing momentum with client acquisition efforts and targeted marketing.
As far as the firm's measures of success, Tucker said that ultimately, "new assets are the lifeblood of our industry."
"It's the most effective measure of how well any adviser, whether you're new or experienced, is executing on their business development strategy," he added.
If FAAs show signs of struggling, the firm provides additional client acquisition coaching support, Tucker said, adding that he has a team of regional training officers in the field and in local markets. They're delivering virtual training, going to local offices for live training, and making themselves available for FAAs when they're having challenges.
"And that doesn't even include the local complex management teams that have boots on the ground daily with the financial adviser associates," for assisting them with challenges like figuring out how to win new business.
At the same time, the firm is trying to better anticipate FAAs' challenges, involving a kind of blueprint approach that companies take with their franchisees —corporations provide newcomers guidance and a playbook to hit their marks and get on the right footing.
That's where the new roadmaps come in, with one instance being guidelines on how to handle clients' goals-based planning process.
"What steps should that adviser take? How should that financial adviser engage the prospect? Are they using a checklist? What are the questions that they ask? What follow up steps should they take at the end of that meeting? How should they reconnect and gain commitment for the next step?" he said.
Morgan Stanley's program offers FAAs a base salary, incentive compensation, and a bonus opportunity; the firm declined to comment on its trainees' base salary.
UBS
UBS, the world's largest wealth management firm, two years ago implemented its new financial adviser training program: the wealth manager development program, which takes place over three years.
It's doubled down on expanding global wealth management particularly as its investment bank's performance has struggled in recent years. The firm recently carried out an overhaul of its wealth business under co-heads Tom Naratil and newly appointed Iqbal Khan.
When a new adviser trainee starts up in the program, UBS starts out by coordinating with existing adviser teams. Experienced financial advisers and their field leadership teams will gather with adviser development leaders and think about where teams could benefit from taking on new advisers.
"First and foremost, we need people who put the client first in everything they do," said Jane Eisland, the head of next generation advisor development. "Of course, they need to have a number of things; strong communication skills, interpersonal skill, analytical skills, and empathy."
They receive virtual and live training, and are immediately placed with a team. The new training program's approach is more tailored to each person, Eisland said, and with a more team-centric approach.
First, newcomers get licensed and go through two weeks of on-site training at different offices. They're given detailed client acquisition and social media training, and then go back out into the field and work for another four to five weeks with their team, all the while still engaged in virtual training with managers.
"One thing that's important about this is that every person is not going to be expected to do the same thing," she said. "You might have one team where they really want someone to go out and acquire clients; you may have another team where they want someone to develop current relationships, and you may have one more focused on investment management."
After a second on-site training, advisers-in-training return to the field and begin production, when they can start prospecting and giving advice. Around two months later, they're brought into UBS offices for another round of on-site training, working more on communication skills and getting trained up on more complex offerings and products.
Advisers-in-training are encouraged to earn other designations, like the certified financial planner designation.
UBS has also taken other steps to bring in and train new talent. We previously reported that it was bringing back a junior position known as the wealth planning analyst.
"Client needs are increasingly complicated," Eisland said. "We're looking for people who help uncover needs of clients and help provide solutions."
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