When Should a Financial Advisor Hire a Junior Advisor?

Why hire a junior advisor?

I’ve been working with financial advisors on practice management and business development since 2004! I’ve seen every type of advisor, business model, and financial advisor brand that you could imagine. In the evolution of your practice, every financial advisor gets to a point in their career when they need to develop a junior advisor to help them manage their client load and/or transition their practice to younger advisors in consideration of succession planning.

Focus on prospecting and the top 20% of your clients

If you have more than 100 clients, hiring a junior advisor becomes critical. What happens is that the advisor cannot work efficiently on prospecting AND also focus on the top 20% of clients if they don’t have someone to help them service and retain the lower 80%.

There are many considerations in focusing on your best clients and becoming more productive. You must have time for marketing, prospecting, branding, and client service. You will need to plan out your client appreciation events for the year. How else can you show clients that you really care about them? You will need time to perfect your branding and value proposition so that the firm does not appear to be ONLY YOU. You must give the appearance of a real company with employees, processes and procedures in order to grow the business and attract new clients.

Succession Planning and Continuity Planning

As the advisor ages and approaches retirement, selling the practice and maintaining the going concern becomes more critical. This is one of the reasons that I recommend NOT naming your business after yourself. A practice without the advisor’s name in the business name, is far easier to transition than one that is named after he or she.

It is very surprising to me that only 5% of the advisors who come to me for business development coaching actually have a succession plan. I am working with a client right now who is in his early 60’s and has previously had health issues. It is crucial for my client to ensure his own clients are taken care of and to ensure his wife and family will have a business to sell should he get hit by a bus or suffer another health issue!

Don’t risk losing good clients by lacking a Succession Plan

Not having a plan can bite advisors squarely in the rear end! I’ve had several clients who could not demonstrate that they had a business continuity plan and they lost potential new clients because of this lack of planning. Without a plan, it’s very difficult for advisors to get the true value of their hard work.

When is the right time to hire a junior advisor?

Don’t wait until it becomes a critical situation before hiring a junior advisor. When you reach 80% of capacity, this is the time to think about and plan to hire your junior advisor. The right time is NOT when you are overloaded and unable to go home on time. When you are not able to prospect for new clients because you’re too busy handling service issues for your client base, this can be a challenging time. When you notice during your annual planning meeting (and you have one, yes?), that you have reached a plateau and you’re ready to get to the next horizon, this is the right time to hire! It is just in time if you are thinking of retiring in the next 2-3 years.

What personality traits should you look for?

There are personality traits and business traits to look for in your candidate as not everyone is suited to do the work you do. Running a financial planning or investment management business is the same as running any business, you must have good business sense! Use this as a checklist for determining who would be a good candidate. Top producing junior advisors are rare and not easy to find. The best indicator of success is past performance, so if the candidate has been successful in the past, they will more than likely be successful in your firm.

Here are 11 good traits to seek:

  1. Entrepreneurial spirit / desire to eventually run or own their own business
  2. Intelligence / ability to understand complex subjects
  3. Outgoing and personable / comfortable having conversations with a variety of people including high net worth clients and prospective clients
  4. Motivation / I’ve always said that one of the keys to success is a good attitude and motivation to do better
  5. Prior finance experience / training someone from scratch is more than most advisors are willing to take on
  6. Financial planning experience / a CFP or other credential holder is highly encouraged but not required
  7. Investment experience / this goes along with prior finance experience
  8. Licenses / what licenses would be helpful with your business model?
  9. Client service experience / a candidate who is aware of the finer details regarding servicing accounts can be very helpful
  10. Time in the industry / 5 plus years is the timeframe most likely to success.
  11. Sales experience / this is a highly sought-after skill that is very useful

How can you be sure they can do the job?

There are several pre-employment assessments that my clients use to determine the suitability of the candidate versus the job requirements. This is where a good Job Description comes in handy. Why leave anything to chance? Candidates are trying to sell themselves, and your job is to weed out the unlikely junior advisors.

How much should you pay?

It’s never easy deciding on what you should pay your junior advisor. If they’re really good, they can go almost anywhere and write their own ticket. You could put a lot of time and effort into training them, and they could go elsewhere. That’s why it’s important to have a confidentiality agreement and a non-compete so that they don’t spend all their time learning your business and then take your clients to their next home.

Base salary plus commission or incentive is often the best compensation. I remember a client I worked with more than 10 years ago who was insistent that they pay only salary and not any incentive. What happened? The junior advisor was not motivated to learn and grow nor to bring any business to the firm. It was not a good match and the candidate moved on leaving my client frustrated and starting again from scratch.

Do your own due diligence and keep in mind that a salary between $40,000 to $50,000 plus incentives is the typical starting place. If you’re fee only and your junior advisor is coming from a wirehouse or broker-dealer, your incentive may need to make up for their commission compensation.

How to find your junior advisor

1.Financial advisors with a hybrid business model can often find a candidate by asking their broker-dealer about other advisors in their geographic area.
2.LinkedIn has become a wonderful source of information about possible candidates. Look for someone who’s been in the field 5+ years who has had some success, but has still not found their stride.
3.Referrals from colleagues and the Financial Planning Association can also yield results.
4.Post the job description on online job websites like Monster and Indeed.
5.Google “financial advisor + name of your city and state” or “Registered Investment Advisors name of your city and state”

 

What happens next?

From the available pool of candidates, schedule phone interviews in order to weed out those who would not be suitable.
Then, bring in the remaining candidates for an in person interview.
Use industry questions as well as behavioral questions in the interviews using a checklist where you rate each candidate.
Develop a scoring system based on your requirements.

Make a decision

Which candidate scores the highest according to your needs? Who is the most personable and trainable advisor? Use your intuition to assess the best candidate.

Training and mentoring

Why do good junior advisors leave? Without a training and mentoring program, the junior advisor may feel lost or direction-less. I have developed a sample program for this purpose so that my clients do not make the mistakes advisors generally make. If your candidate has the personality traits and skills to do the job, but no training or mentoring, the relationship is 90% likely to not work out. It’s better to put in the time and effort in training the candidate to ensure success.

Protect yourself!

Have your attorney draw up a confidentiality agreement and a non-compete! Think about a buy-sell. If you’ve worked with business owners, you know the importance of having a buy-sell agreement or an agreement worked out with your broker-dealer to transition to another advisor. If you already have your junior advisor on board, the buy-sell becomes even more important for the smooth transition.

Conclusion

When you have reached a point in your practice where hiring a junior advisor is necessary for the continued growth of the firm, this is the time to work on your business as a whole. Decide who you are and where you’re going. This is a crucial time to seek business development coaching and move your practice forward. I hope this information is helpful and valuable to your practice. Contact me for a consultation!

About Suzanne Muusers