BIC held a conference call roundtable with some heads of investment programs to see how they're managing recruiting. Our panelists included Howard Hammond, president and CEO at Fifth Third Securities and Insurance in Cincinnati; Michael Miroballi, president and COO of Harris Investors Services in Chicago (with Celeste Cece, his lead recruiter); Dan Overby, president of BankUnited Investment Services in Miami Lakes, Fla.; Renée Vanek, president of Affinity Investment Services, a credit union in Basking Ridge, N.J.; and recruiter Paul Werlin, president of Human Capital Resources in St. Petersburg, Fla.
BIC: Did you hire new people for your programs in 2010, and if so, how many?
HOWARD HAMMOND: We were up approximately 70 advisors last year, bringing our fully dedicated reps to 335.
MICHAEL MIROBALLI: We brought in an incremental six to seven advisors and had a number of advisors turn over, focusing on really upgrading talent, so we went from 55 to 62.
DAN OVERBY: I joined BankUnited only 15 months ago, and as a failed and reacquired institution, we had some unique challenges. There had been about 50% attrition in the months leading up to the failure. When I got there, I had 12 advisors. I have 25 today.
RENÉE VANEK: I had six advisors and then I hired one more, but in order to expand our program, we also partnered with an insurance agency nearby that had five registered reps who changed their broker-dealer affiliation to us. So now we have 12 registered reps.
BIC: Where are you getting these reps?
HAMMOND: We had a lot of success last year with some of the wirehouses, with bank advisors from different programs, as well as some independents, so it was really a fairly diverse mix. I wouldn't say we're targeting one specific group; we're looking for the behavioral characteristics of the advisor. We want someone who truly listens to the client and offers the appropriate solution. Our annuity revenue is less than 20% of our total revenue, so we want an advisor who has a well-diversified product mix before we bring him into the fold at Fifth Third.
CELESTE CECE: A lot of our new candidates came from employee referrals, both from financial advisors and our branch managers. We do job postings on sites like Monster.com, as well as industry-specific sites like BrokerHunter.com. We've been reaching out to candidates electronically through sites such as LinkedIn. But last year employee referrals really were a big source of hires.
MIROBALLI: Similar to Howard, we're really looking for advisors who take a much more holistic view of servicing their clients, those who have experience that really focuses on planning. And many of those advisors are looking for a broader platform.
OVERBY: Our candidates came from other bank broker-dealers. We were fortunate to pick up some quality guys from other failed programs in Florida. But most of them came from one large bank program where the reps were pretty disenchanted with significant flaws in its middle and back office.
VANEK: What seems to work the best at our program is hiring independents because while we do get referrals from the branches, they still need to do a lot of prospecting on their own.
BIC: Paul, how competitive is it out there for new hires this year?
PAUL WERLIN: I think what's interesting is that everyone's experience over the last year is so diversified. You've got Renée looking at independents, Howard looking at wirehouses. The real key here is to fit within the culture and objectives of the program.
Getting to how competitive it is. It's like politics: All politics is local, well, all recruiting is local. It's incredibly competitive for a gigantic multinational bank aggressively looking for very experienced people with preexisting books of over $750,000 or $800,000. That's why some of these bigger shops, both in the bank channel and without, are still offering some very big upfront packages.
In other cases, like Dan's experience, where you've got a distressed organization, it's not nearly as competitive. I'd say that for bank recruiting as a whole, it's moderately tight.
BIC: Are any of you offering incentives or upfront bonuses to attract new reps?
HAMMOND: For the appropriate advisor, we're offering a combination of upfront, enhanced payout and back-end based on performance. So we use all three to combine a deal for a quality advisor-anywhere from 25% to 50% of trailing 12 up front, another piece on the back end, and then payout based on production, which could range anywhere from 40% to as high as 80% for a time.
WERLIN: Are we talking about a combined package that could be worth 120%, 150% of gross?
HAMMOND: In some cases, yes.
WERLIN: You're approaching the levels of what we would consider some of the megabanks.
BIC: Is anyone else offering special incentives or upfront bonuses?
MIROBALLI: At Harris, offering upfront bonuses has not been our policy. However, we do offer enhanced payout and transition pay, so we help get the advisor on-boarded through a forgivable draw over some specified period from six months to a year and a half. And then we provide an enhanced payout for both brokerage and fee business over their first two years. This gives them an opportunity to build their practice and still feel they can sustain themselves financially.
BIC: What's your grid range?
MIROBALLI: It's probably very much in sync with the rest of the industry, anywhere from 20% to 40% on the brokerage side, and the fee side's a little bit higher.
BIC: Is everybody hiring more people in 2011?
MIROBALLI: We have more aggressive hiring goals this year. We're looking to expand within our footprint, so we've targeted an additional 10 to 12 advisors.
OVERBY: Given that we have basically doubled our advisor population in 2010, our goal is to focus on our more tenured advisors, and to really allow the assessment of our current population to drive my recruiting for 2011. So I don't think we see significant growth in advisors.
HAMMOND: We're looking to hire about 20 new reps.
VANEK: I'm still looking at ways of finding additional independents to whom we can provide some types of leads to enhance our program. But if I don't find anyone that fits, I probably won't be adding to staff unless somebody leaves.
BIC: It has to be an independent?
VANEK: Yes. I've created that type of path for the advisors within our program. I have several advisors who have been with the program since its inception 15, 16, 17 years ago and they're pretty much independent within the program. So as opposed to losing them and their books of business to setting up shop elsewhere, I enhance their payout. I would love to do that with a couple of others, but after 2008 and into 2009, they were a little apprehensive about cutting off their referral source.
BIC: Do your advisors get referrals from the credit union?
VANEK: Not the reps in the insurance agency I brought on. But I have a team of advisors in the branches that do get referrals.
BIC: Is there any problem integrating independents into the credit union?
VANEK: In our investment program, it tends to work well. I think they appreciate any leads they get. They seem to work well with the branches.
BIC: Howard, you're hiring from wirehouses, where there's a very different culture than in the banks. How do these advisors adapt?
HAMMOND: The key is to make sure that both the advisor and the bank are clear on the expectations and that advisors understand they will be part of a group and no longer an individual practitioner. Once we get past that, we make sure that the bank understands the role of the advisor for the particular branches that individual will cover.
A lot of the wirehouse reps are starting to understand that it's not 20 years ago, and they're a lot more comfortable with the bank platforms and the breadth of product, and if they've been at it for five to seven years and they're doing $300,000 to $500,000 in production, they've done a pretty good job.
We try and make them understand if you come to a bank and partner with some of our financial centers, we can show you a path to grow your business pretty aggressively, whereas at the wirehouse, they're still doing the same things they've done in the past. That's been a compelling story with some wirehouse reps. The wirehouses are really focused on that $500,000 and higher advisor, so below that has been a nice niche for us.
BIC: How do you integrate independent recruits?
HAMMOND: Everything that I've read over the past few years says you've had a rush to the independent channel. But I think some advisors get there and aren't necessarily as fulfilled as they thought they would be. So for us, it's really the same dynamic to make sure that the independent wants to work in that team approach in a bank.
MIROBALLI: One thing we do is include the retail bank in the interviewing process. We narrow it down to who we think is a good fit, and then we'll introduce them to the regional president as well as the bank manager. If the retail bank says, "This individual would not be a good fit," we won't move forward. But if we agree, they're going to feel like this is somebody they had a hand in bringing on board, and they're going to be committed to helping support that individual.
I agree with Howard. The individuals who are out there working, either independently or for a wirehouse, may not have the best hunting skills in the world for sourcing leads, but they certainly know how to operate once they get that client in front of them.
BIC: Is anyone trying to recruit from inside the bank, either from licensed banker ranks or creating your own training programs?
MIROBALLI: If we identify a high- potential licensed banker, we will not move them directly into an FA role. Ideally we have them work in different areas of the broker-dealer to get a sense of how we operate. So maybe we have them spend 60 to 90 days in our operations group and then in the call center, so they get some client interaction and understand the servicing piece, and then work under the mentorship of a seasoned financial advisor as a junior FA sales assistant for a period. That gives them enough exposure to various parts of the firm and gives us an opportunity to identify an expansion opportunity to place that individual.
OVERBY: I'm not a huge fan of taking a licensed banker and moving them into a dedicated advisor role. I believe that that's a disservice to clients. I've chosen to commit my resources to developing our advisors, improving their practice with a focus on financial planning, fixed income and alternative product sales.
That aside, we do have a comprehensive training program for our licensed bankers, and we do, similar to what Mike just discussed, move our licensed bankers into junior advisor roles.
HAMMOND: Fifth Third he firm promotes an average 10 people a year, after they partner with an experienced rep.
BIC: Dan, can you talk a little bit about what happened when your previous bank, Colonial, suddenly shuttered its program?
OVERBY: I had been at First Horizon for 20 years, and I left to take a position at Colonial Brokerage, but Colonial failed, and in October of 2009 we learned that the acquiring bank, BB&T, wasn't going to purchase the broker-dealer, and it ended up displacing about 100 employees, 80 of whom were brokers. From a professional standpoint, it was probably the greatest challenge of my career. But over the next six-week period we elected to host calls for six to eight other bank programs and independent broker-dealers in our region to help our teammates find new positions. And we found new firms for probably 90%, 95% of our brokers.
I'm pretty well networked in our industry through BISA, and I reached out. Howard Hammond was one of the guys whom we hosted a call for. We did six or eight conference calls over four weeks, and then follow-up calls with a couple of the broker-dealers to allow the advisors to dial in and listen to the program management team or the sales manager, national sales manager of a firm, describe their program.
Morgan Keegan probably picked off about 10 of our guys. I think SunTrust got several, so it worked very well, and it was an efficient and effective way to give our advisors instant access to other firms without having to expend a lot of energy trying to line up interviews.
BIC: You've heard that BA and Merrill put in a "take-it-or-leave-it" garden leave—telling some FAs to sign a new agreement that would sideline them for up to eight months if they leave the firm, or risk losing their 2010 bonuses and their jobs. Do you use any kind of noncompete or non-solicitation agreement?
VANEK: When I joined Affinity three and a half years ago, there were several advisors who had been there for a number of years, and only a couple of them had any type of non-solicitation or non-compete agreement. I think it's important to have something in place for both sides so that they know what to expect once they leave.
When I sought legal counsel on this, they said it's very difficult to impose an agreement on an existing employee unless you give them something in return. So I created a retirement plan for some of these long-term advisors that would give them the opportunity to continue to get paid on their book of business for about three years after they retired, and that way I was able to get them to sign agreements that, in the event that they left, they wouldn't solicit clients, but if a client left, they would pay the credit union or the investment firm 25% of the revenue that was generated from those clients.
BIC: How has that worked out?
VANEK: They wanted something in place because they were concerned that they could ultimately get fired. So it was almost like guns were pointed at each other, and I wanted to eliminate that. I didn't want them thinking, "What's going to happen if I leave?" I didn't want them to leave. They were top-producing, high-quality advisors. And now nobody's worried, and nobody has left.
BIC: What about the new hires?
VANEK: They sign a non-solicitation agreement up front. I can look at changing the agreement to put in this retirement plan, but I typically look at that after they've been with the program for at least five years, generating a certain amount of revenue.
HAMMOND: We have a non-solicit. But in terms of other punitive pieces in the compensation plans, I'm just not a believer in that. You want to create a culture that people want to run to, not run from. We believe we're very advisor-friendly and create a great culture. We have long-term incentives in place for our employees. It's structured to reward the best performers.
BIC: Celeste, you said that you look at LinkedIn to find new advisors. How is that working?
CECE: We can get back to you after we've had a little time to evaluate the results.
WERLIN: As a recruitment firm, we use LinkedIn extensively, along with a slew of companies where multiple employers post jobs, and you have to be an approved recruiter to actively solicit placing those people. Websites like BountyJobs.com have been doing extremely well. When we're looking for candidates now, with the exception of our own database, places like LinkedIn and these aggregators probably account for 50% of the candidates we talk to.
BIC: Is anyone using incentives for cross-sell, and how important do you think cross-sell is in your program?
HAMMOND: Fifth Third Securities does have cross-sell incentives and they have been successful.
MIROBALLI: We do have a cross-sell goal for each financial advisor and a quarterly payout incentive for hitting certain benchmarks. I think it has had some impact on increasing cross-sell. We went from an annual bonus to a quarterly and bumped up the amount of the bonus. The broker-dealer pays the bonus. We're not getting any reimbursement from the retail bank or any of the other partners, but we think by increasing the frequency and the amount, it became much more relevant and meaningful to the advisors.
VANEK: There used to be a cross-sell bonus, but I found that they were doing it anyway. So I reallocated that money for an annual bonus tied to something else. The credit unions are very cooperative in partnering with each other. The mind-set of the advisors is that they just do that naturally.
OVERBY: At BankUnited we established a program called One Team, and have encouraged our advisors to go out on joint calls with their branch partners for solicitation of small businesses, their private bankers or their commercial bankers.
If you do four calls a month we will give you an additional $500 to $1,000 of gross and put it into their grid. Somebody who meets those expectations over a 12-month period can increase their payout annually by 1% to 2%. We're generating about 75 to 80 joint calls across our banking enterprise, retail, private banking and commercial. Bank referrals decline, particularly here in Florida in the summer. So it has enabled our advisors to add prospects to their books.
If somebody makes four or five calls a month to business owners in the vicinity of their hub branch, then they've got four or five people that they've now been introduced to. We assisted in winning business for the bank, retail, commercial or otherwise, and picked up a good amount of referral business from centers of influence, particularly CPAs and attorneys.
BIC: Do you have any thoughts about whether it makes sense to have licensed bankers just refer prospects or just sell, or do both?
HAMMOND: We have a pretty robust training program. When I first came over to Fifth Third, I was against the bankers selling, but we put a program in place that was very disciplined, we trained them very well, and now I'm much more comfortable with that.
BIC: Do any of you have a planned program for on-boarding newly hired advisors?
HAMMOND: We have a very structured on-boarding process. You need to make sure that that experience is good. Someone comes to a new firm and they're excited about joining, and very often if they go through a bad process in the beginning, you can turn that excitement off quickly. So we check in with the advisors after their first week, their second week. Their sales manager is there with them constantly that first month or two to make sure they get acclimated. I talk to each group at every training class to answer questions about the firm. We want to make sure to give them a great deal of confidence in the firm and the way we behave toward our advisors.
WERLIN: We see it all the time, and those institutions with the lowest turnover tend to have good, very well- defined on-boarding programs.
Typically, the first 90- to 120-, 180-day plan starts pre-hire. There's a whole checklist so that business cards are ready, computer terminal, passwords assigned, all that stuff, so the day someone walks in, they don't have to fumble around. They feel like the whole organization was just waiting for them to arrive.
Then they're assigned maybe to an experienced broker as a resource and a contact person. There are usually milestones or meetings once a week with the direct report rather than just "How's it going?" but it's a specific, laid-out agenda.
BIC: Can you describe your ideal job candidate?
HAMMOND: For us, that candidate has a proven track record of success in the business. We want to see someone with a level of experience in the industry, someone who can represent this firm in a professional manner, put the client first and make sure that they're going to adhere to our standards.
We also want to make sure that the advisor understands who we are as a firm. We feel very strongly we're a great place for advisors to work. We want people to build a career here over 10 or 15 years. So that would be my generic message out there in terms of what we're looking for.
BIC: How many years' experience would you require?
HAMMOND: At a minimum, we'd like to see five to seven years of experience at a wirehouse. In a bank, it's probably eight years-plus. In the wirehouse we like to see a $250-plus advisor. In the banks we like a little higher production level, preferably over $300 if not $400.
MIROBALLI: Our ideal advisor is someone who can fit culturally with the organization. As Howard said, an advisor who's always going to put the client's interest first is absolutely essential. They need to be able to operate in a team environment.
I give them the perspective that when you're provided a referral by somebody from another line of business, they're inviting us into that relationship, and you're there to enhance the overall client experience.
We also look for an advisor with an entrepreneurial spirit, a self-starter, and not somebody who's going to wait for the referrals to come, but who's going to build relationships with clients or with their sales partners.
OVERBY: I try to convey in my recruiting that we run an advisor-friendly program, as Howard said earlier. It's a very transparent program: 100% of their GDC goes to their grid. We don't have any haircut. 100% of their 12b-1s and 100% of the production of their licensed banker population, all of that goes into their grid, which is between 23% and 45%.
I'm less concerned about the past production of a rep. I've been doing this now for 23 years, and I'm more interested in finding advisors who value culture over independence, who want to become part of the fabric of an organization that has staying power and that is going to take an interest in seeing them grow. I'm looking for someone who has three to five years' experience, and I prefer someone to come out of the bank channel because they already understand the landscape.
VANEK: I look for the cultural fit, because in the credit union environment, they're not customers, they're members, and so it's really a different perspective.
I also don't look for individuals' past production, because, obviously, the last one I hired was a wholesaler who really didn't have production per se. But looking at the business as a long-term venture, looking at it as an entrepreneur, that this is their business, how they're going to build it, how well they're going to cultivate relationships. I do have them all speak with the branch manager or regional manager to make sure that the fit is there and that they are going to work in a team environment.
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