To most of us in the financial world, the term “capital” registers as another word for money. In a business as personal as wealth management, human capital can be considered just as critical. Particularly in small financial advisory practices, a new hire that’s not a good fit can stymie the efficiency and morale of the entire team.
At its core, your human capital strategy should align your employees’ motivation and performance with the firm’s goals—and inspire everyone to work cooperatively toward their fulfillment. It should also clearly define what advisors and employees should expect from one another. The “four Rs” offer advisors a framework for tackling the human capital challenge:
1. Recruit: early, often, and in the right places
Often, financial advisors take a reactive approach to hiring: they look to “staff up” when someone leaves or when things get busy and they need help. But to build a top-performing team, advisors need a disciplined hiring strategy that includes thorough due diligence and starts with recruiting in the right places—before they need to fill empty seats.
Firms looking for new talent should consider recruiting through universities with dedicated financial planning degree programs. Unlike a general business or finance major, students in these programs gain hands-on experience with the tools of the trade, and often graduate fully prepared to complete exams such as the CFP® Certification Examination or the CFA Exam. Texas Tech and Virginia Tech both offer well-regarded financial planning programs.
Outside of academia, consider a placement firm or headhunter that specializes in the financial planning industry—Advisors Ahead is a great example. While these services can be expensive, they tap into an established professional network and handle the time-consuming legwork of identifying, vetting and starting the conversation with professional candidates.
Last but not least, online job boards that cater specifically to the financial planning industry (such as the one maintained by the FPA) can also be effective resources for identifying candidates.
2. Receive: don’t overlook the importance of onboarding and training
Once new hires join your ranks, a dedicated onboarding process and ongoing training program can make a positive difference in their assimilation into your firm’s culture—and their attitudes about staying with the team long-term. Onboarding is an opportunity to explain the firm’s vision, values, and goals and to set expectations for each new hire’s role and performance.
To start, these three simple steps can go a long way in making new people feel welcome and grounded:
- Introduce new hires to the firm’s people and systems
- Provide an overview of their responsibilities and the training they will receive
- Meet with them regularly to see how they’re doing
Ongoing training is a much more complex undertaking, but there’s a powerful argument for getting it right: as a business owner, investing in your employees is just as important as devoting yourself to your clients. A highly competent staff that exceeds those clients’ expectations and makes them feel valued is vital to achieving sustained growth and a positive reputation.
Creating a set of “expectation milestones” establishes a clear vision of what new team members are expected to learn through the training process. We recommend developing organized training programs that explain expectations for the introductory and orientation period as well as for the first 30, 60 and 90 days. For some positions, such as technical specialists and managers, you may want to extend the learning period over 6 to 12 months based on the complexity of the required skills and abilities.
3. Retain: create career ladders to chart growth
A key component of motivating staff members is providing a clear roadmap of their career trajectory within the firm and the steps they must take to reach the next level. One way to accomplish this is by developing career ladders. Clearly defined “ladders” create a much-needed common language about advancement that helps you correlate increases in compensation with increases in commitment and contribution. We sometimes call career ladders the less-detailed cousin of the job description; job descriptions provide team members with defined outcomes, roles, and responsibilities that clarify required contributions, while career ladders define how greater contributions lead to increased responsibility and compensation.
More importantly, career ladders give high-quality employees a way to know where they stand and what they can do to advance their careers. Unfortunately, few firms provide formalized career paths, even though it is in the best interests of both the firm and the employee. Our “Best Practices: Human Capital 2010” study showed that 60 percent of top performing financial advisory practices have some form of career advancement in place, compared with only 34 percent of other firms.
4. Reward: develop a compensation structure that delivers
Here’s another surprise: fewer than half of all firms we surveyed in the 2010 edition of our Best Practices Study Series had a compensation plan in place, formal or otherwise. An effective compensation plan allows every member of your team to clearly understand how he or she can contribute and earn more by helping the firm do the same, and incorporates the following:
- Your firm’s philosophy about pay and performance, and what it values
- The behaviors and outcomes you want to reinforce and reward
- How people earn their pay and what they can contribute to earn more
- The short- and long-term impacts for both individuals and the firm
Much more than a mechanism for pay, a strong compensation plan can be an important recruiting and retention tool and a reward system that reinforces the right behaviors and outcomes. Your compensation plan should communicate reciprocity: When I win, the firm wins; and when the firm wins, I win.
To which we’d add: Your clients are likely to win, too.
The human capital challenge is constantly evolving, and no two firms have exactly the same needs. The four Rs discussed here offer a basic framework to help advisors approach hiring and retention in a consistent, thoughtful way that will support their practices long-term.
Matt Matrisian is Senior Vice President and Director of Practice Management at AssetMark, Inc.
