Wells Fargo Advisors’ is looking for recruits in out of the way places. In April, Kent Christian, president of Wells Fargo Advisors’ financial services group, told a Securities Industry and Financial Markets Association conference that the aging FA population is creating a shortage that will seriously impact the industry and investors, and which he believes “cannot” be solved by recruiting from rival firms.
The market crisis of 2008—and a subsequent dwindling number of investors—has already forced a number of FAs out of the industry. The relatively high expense and low success rate of broker trainee programs is also a problem. Wall Street b/ds hire only about four to five percent of the prospective rookies who apply for a job, says Andre Cappon, who heads the NY-based CBM Group—an international industry research and consulting firm. But that kind of selectivity doesn’t necessarily lead to success. “Less than 20 percent of these hires, who cost as much as $300,000 to fully train, survive past year two or three of a four-year training plan,” he says.
And so in 2009, to counter these odds, WFA started seeking approximately 50 percent of its potential new FAs from among career-changers, said company spokesperson Rachelle Rowe “These are people with an average of 16 years work experience behind them,” she said.
Statistics confirm that the FA workforce is indeed aging: A 2010 report from Boston-based Cerulli Associates says that less than 25 percent of all financial advisors are under age 40, while just 5.6 percent are 30 or younger. Varying sources put the average advisor’s age at between 48 and 52. And, 14 percent of advisors, the Cerulli report says, are over age 60 and thinking about succession.
“The older FAs have most of the ‘high-net-worth’ clients, and most of the assets,’ says Chip Roame, managing principal of Calif.-based industry research and consulting firm Tiburon Strategic Advisors, adding that on an asset-weighted basis, the average advisor is 58 years old. “Many of their clients will need to be transitioned in the foreseeable future, which makes the need for new talent even more pressing.” (In fact, we recently wrote about whether fears of a talent crunch are overblown.)
While spokespeople from and Morgan Stanley Smith Barney and Merrill Lynch—the country’s first and second-largest brokerage firms respectively—said that their firms, too, have found new recruits from other industries, unlike Wells Fargo, neither would confirm a direct initiative to do so, or provide any numbers. As of press time, UBS had not responded to our request for comment.
With just over 15,200 advisors, WFA is the nation’s third-largest brokerage firm. Michael Zuccarello, managing director of training and development for WFA, explained how the firm’s new recruitment initiative began. “First, unlike some other firms, we decided we wouldn’t slow down our training programs after the market crisis of 2008,” Zuccarello said. “We wanted to proceed as usual. We’ve been steadily adding at least 800 new FAs to our workforce each year.”
Additionally, he said, “we felt we could benefit from training people who’ve had experience either running their own businesses, or working in a different dimension of the financial industry—such as commercial banking or insurance. These people typically have a proven aptitude for sales and a network of clients—or the potential to build a network very quickly. We have a robust training program in St. Louis and, when we bring in people with real world experience, we find it really sets them up for success.”
WFA has done quite a bit of recruiting in industries like sales, banking, insurance, and even the military, Rowe said. Some of these recruits are “doing incredibly well,” she said. The firm has also interest among people from the commercial lending and mortgage industry, Zuccarello said.
In March 2010, WFA rolled out a “Specialist Track” program to match trainees who have certain specialties—like insurance, for example—from prior careers with senior FA’s, Zuccarello said. After undergoing the traditional four-month core training in St. Louis, the firm’s branch managers try to pair them with FAs who want to add their ‘specialties’ to their practices. “The new recruit gets to learn the ropes from a senior FA, while the FA can expand what his team can offer clients. It’s a win-win situation, and we get a great return on our training investment this way.”
To date, Zuccarello said, 96 percent of its ‘specialist track’ trainees are still with the firm.
Wells also added a “Rainmaker Track” last year, to help it recruit people with successful business development backgrounds. “These people have the strong entrepreneurial drive that makes advisors successful, and often have a certain level of sophistication that we can benefit from—having done things like having managed their firms’ own 401(k) plans, for example.” Zuccarello said.
Still, WFA continues to seek half of its recruits from within the brokerage industry—or among new college graduates. “On certain levels, it’s easier to introduce a young trainee to an FA team than to match more experienced folks with them,” Zuccarello says. “We still want to have that flexibility. And, naturally, we still want to be able to recruit top advisors from other firms.”
Roame believes the 50/50 recruitment strategy appears to be working. “It’s already been shown that early and mid-career sales and relationship management people from other industries are the most logical place for b/ds to focus new recruiting efforts,” Roame said. “I think many of today’s 20-somethings are too short-sighted and expecting of quick success to make them ideal candidates for this business. It definitely takes a certain level of tenacity to get over the initial hurdles and become successful advisors.”
Adds Cappon: “The ideal candidate is a consummate salesperson who can handle rejection well. That is a characteristic lacking in so many of today’s recruits.”