Wealth Management Recruitment In Challenging Times
Family Wealth Report
April 6, 2020
Wealth Management Recruitment In Challenging Times
Allan R. Starkie, Ph.D., April 6, 2020
The work of wealth management executive search firms is particularly challenging at the moment because of COVID-19, even with the two-way video and other technology that changes how people work. A recruitment specialist in the space considers the issues.
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Recruiting in the Winter of our Discontent
It is not uncommon for a client or candidate, in a moment of unguarded frankness, to refer to my firm as “headhunters.” They are invariably embarrassed, at having used this ostensibly pejorative moniker; yet, I am never offended. I am simply amused by the inaccuracy of this nickname. I have always thought of those in the recruiting profession as a flock of carrion birds. We circle the earth, close to the ground, with sharp beaks canned downward, and olfactory senses tuned to detect any whiff of the pungent smell of discontent, disillusionment or despair. So it should come as no surprise that some of our most effective hunting periods are those immediately following a major market collapse.
In the immediate aftermath of the 2008 meltdown, we were able to lift out the entire Westchester office of Citi Private Bank, the entire Greenwich office of HSBC, the leadership team of the Bank of New York, and a sizable contingent of the ailing Modern Bank. What is even more extraordinary, is that the asset portability associated with these teams was more than triple that which we have experienced during bull markets. The reasons for the vastly superior success in portability are fairly apparent. During such periods of uncertainty, clients are more inclined to follow a trusted advisor, than to remain behind and be assigned a stranger, during a frightening and vulnerable time. Perhaps even more significantly, is the fact that the diminished value of their assets, mitigates the potential for excessive capital gains taxes, that a move might trigger, in a thriving market. Finally, in the fee-based environment in which we live, we find that our clients look longingly at the panacea of portable assets, as a lifeline to recouping their bottom line, immediately following a crash. The combination of these three factors makes life for a carrion bird a beautiful thing, at such horrible times.
This time is different.
Apparently the combination of a global pandemic, the shutdown of our economy, and a market crash creates a slightly different dynamic. Our client-base (largely comprised of RIA’s) has reacted to this challenge in three broad categories.
- The Baby and the Bathwater. The first group (fortunately the smallest) if typified by hysteria, and a debilitating lethargy, in which the single call-to-action revolves around firing anyone they can find, in their vacant halls. Admittedly, some of the shrewder owners are using this opportunity to rid themselves of professionals they longed to eliminate, but lacked either the courage or the documentation to do so earlier. It is, after all, better to blame the dismissal of a questionable employee on the ravages of an invisible, mutual enemy. But many firms are less discriminating, and faced with the reduction of a third of their top-line revenues, are not just throwing away the baby with the bathwater, but are including the au pair, pediatrician and sometimes even the mother. Ironically, many of these same leaders repeat their hackneyed mantra of “staying the course,” to their equally terrified clients. Many of the firms in this category will never completely recover from this crisis. Instead, they will limp along until a roll-up firm, or healthier RIA acquires them.
- Keep the Powder Dry. This second group is comprised of those that either officially, or quietly, have adopted a hiring freeze. This is not an unreasonable reaction. Many of these firms were among the first to apply for PPP loans and are using the time to reconfigure themselves. These firms may miss some excellent hiring opportunities, over the next several months, but at least they will have maintained the integrity of their team.
- Buy Low, Sell High. The final category are those opportunistic firms that have waited for a downturn to augment their growth through organic and non-organic means. The CEO’s of these firms, long distressed by sky-high acquisition multiples, and the souring costs for exemplary sales professionals, have quietly been stockpiling cash for just such a moment. This group has already created protocols for hiring in these strange times. Although each firm approaches the tactics associated with remote hiring slightly differently, here are some of the components.
- The first and longest phase of any major search is expended in research. A target list of competitive wealth managers must be created, and the organizational charts sourced and broken-down, to reveal the appropriate client-facing, revenue-producing professionals. This process typically takes about thirty days. Starting at the 14th day (and overlapping with the initial research phase) is what is called “execution.” In this phase all the potential candidates developed by the research team are called, and sourced for the role. By the sixtieth day of the search, a strong slate of candidates will have formed, using this process. What is significant, is that a slate of superb candidates, and teams, can be developed without ANY physical contact, during the initial sixty days. The Buy Low, Sell High CEO’s are invariably aware of this, and are using the quarantine period to develop a back-log of qualified candidates; with the assumption that the need for face-to-face interviews will roughly coincide with the relaxing of some of the distancing requirements.
- The second initiative these firms are taking is leveraging video interviews to screen the pool of candidates without physically meeting them. Some of our clients have developed sophisticated interview schedules, entirely based on Zoom and FaceTime. Again, this keeps the process moving forward, while allowing for future physical interviews to be performed at the appropriate time.
- Those members of this group that were further along in their recruiting processes, have opted for controlled face-to-face meetings for the finalists under strict, CDC-conforming conditions. In all cases, the candidates are encouraged not to participate, if they are not comfortable with the safety precautions. Strict adherence to distancing rules are applied to the interview itself, and a sterile venue is chosen. In some cases gloves and masks are worn.
- Finally, the firms within this group have been clear with the finalists, that the start-date will need to be flexible, and correspond to the reopening of their offices. Onboarding a new employee is always challenging, and is particularly difficult to do remotely. But even a two-month hiatus from accepted offer to start date, is an acceptable expediency in such times.
Clearly, even for carrion birds, swooping down on the restless would be an ill-advised breach of social distancing etiquette. Nevertheless, at least two-thirds of the recruiting process can be accomplished without any physical contact. The sensible use of video conferencing, and delayed start dates allow for the potential of a robust recruiting effort, during this period. The time of home-exile can be effectively used to expedite bouncing back, with a stronger sales-force, and even enhanced portability of assets. We all know that there will be an end to this horrible period. It is rewarding to work with the visionaries that are able to posture for a stronger company, as they approach the other side.