Banks and credit unions need to up the ante if they want to lure advisors from other firms, according to a new report from Kehrer Saltzman & Associates.
The upfront sweeteners that financial institutions typically use to attract top performers arent effective in the current environment, Peter Bielan, a principal of Kehrer Saltzman and an author of the report, said in a telephone interview.
Even the seemingly attractive $40,000 base salary with a 40% payout for one year did not get good reviews. In most cases the top executives of investment services units in financial institutions reported low satisfaction levels for the competitiveness and success of these standard recruiting incentives, the authors write in the report.
The recruiting packages now commonly used might appeal to lower-tier advisors with $200,000 to $300,000 in annual production but not the much sought-after higher-producing advisors. To attract these advisors, financial institutions need to offer more progressive recruiting incentives that ensure that advisors have comparable first-year earnings and upside potential to make the move to a new institution pay off.
For example, why not offer to pay the advisor whatever he or she earned the previous year for one year? Thats exactly what one of the plans outlined in the report involves: paying the full W-2 amount the targeted advisor made in base salary for the first year of his or her transition. Future years would be paid on a regular grid. This type of plan is well-suited for the experienced executive that has had prior successful sales experience but has moved to sales management or executive management, and now those opportunities have dimmed, the report explains. Such an incentive, it goes on, would allow well-connected prospects with extreme relationship acumen to ramp up their business without taking on a financial burden that would typically prevent this type of career change. A financial institution might use this recruiting incentive to target advisors who have not produced in recent years but have the ability to produce in the $750,000 range.
The report, titled Recruiting Packages for Financial Advisors in Banks and Credit Unions, discusses 10 other recruiting incentives that the report says distinguish themselves from the common industry recruiting packages. The 11 plans outlined in the report come from 30 banks and credit unions that were interviewed for the study.