Overcoming Hiring Hurdles

by Caleb Brown, CFP^®

Caleb Brown, CFP^®, is a financial planner, founding member of Virtual Solutions Consortium, and partner in New Planner Recruiting, a recruiting firm specializing in placing top talent in entry level professional positions within the financial planning industry. He can be reached at www.newplannerrecruiting.com.

New college graduates and career changers who dream of becoming financial planners must first climb what is arguably the biggest hurdle of their fledgling career—obtaining employment within the industry. Securing a first job is certainly a chore no matter what industry is chosen, but with financial planning’s infancy, lack of a professional career track, and even a dearth of internal career tracks, the challenge for new planners is monumental. Additionally, the dire status of the financial markets and global economies has not made this process any easier.

The Need for Hiring New Planners

Let’s be clear though, even though market and financial conditions affect hiring, gaining full-time rewarding employment in the financial industry is very difficult even in favorable economic periods. Because of this, unfortunately, many talented candidates never get the opportunity to succeed because they don’t find their right fit. If this isn’t rectified, it could be a long-term concern for the industry because the average age of a financial planning business owner is mid-50s and retirement is not far on the horizon.

Additionally, Pershing Advisor Solutions CEO Mark Tibergian has stated that the average age of financial planners is increasing one year for each calendar year, proving few firms have successfully integrated younger planners.¹ Although many planners think they can or would like to work forever, and some may have even pushed off retirement in light of market conditions the last few years, it is inevitable that they will begin to retire in large numbers at some point. And if they do retire before successfully passing the torch to the next generation, the industry is going to have difficulty moving forward and building on the existing body of knowledge. Thus, it is absolutely imperative that we continue to replenish the ranks with new people who offer fresh ideas as the pioneers begin to transition out.

The Difficulty in Hiring New Planners

Why is it so difficult for owners to hire and for new planners to get hired? Is it because there are too few qualified candidates? Maybe. Perhaps there are too few firms hiring? Possibly. It might be something else though that many don’t realize. Recent research released by FPA states that 84 percent of firm owners rely on word of mouth/networking to recruit new hires.²

Let’s examine why firm owners find the word of mouth/network recruiting method so compelling. First, many do not know any other way to hire; plus, many owners are relationship people who understand the best people to collaborate with in business are often referred. Second, there is little to no cost—or more importantly, time commitment—involved with this approach. This is key because when firm owners want to hire they are usually beyond overloaded. While this looks promising at first glance, it poses a problem for anyone outside the industry, such as college graduates and career changers, who tend to have small professional networks, if they have them at all.

Here are some additional strategies firms may want to consider in recruiting new planners:

Participate in Career Day programs. This program is usually offered by your local, regional, or national FPA or NAPFA chapter, and was established to give association member planners a convenient opportunity to hold face-to-face interviews with multiple candidates for full-time positions and internships. Plus, it offers students a structured environment to network with planners as well as the opportunity to interview with several different planning firms in one place. By holding this program, the association chapter can facilitate the interview and networking process between top financial planning students/career changers and local area financial planning professionals. This can be a beneficial way to recruit students from a firm owner’s perspective because it offers the convenience of being able to interview while attending a chapter meeting for continuing education. Owners still have to review potential candidate résumés, which can be cumbersome depending on the size of the event, and take the time to interview.
Attend career fairs on college campuses. This is often costly and time consuming and was one of the primary reasons for the creation of Career Day. In this scenario, the firm owners go to the students. In the Career Day program above, the students come to the firm owners. Also, because the career fair events on college campuses are usually open to all students regardless of major, firm owners need to ensure beforehand they are interviewing qualified candidates.
Participate in internship and/or mentoring programs. Usually hosted by financial services associations, this can be a good way for firm owners to be exposed to many different candidates and get to know a potential hire while the stakes aren’t as high. Firm owners need to be aware, though, that someone who makes a great intern might not make a great full-time permanent employee.
Use industry-specific job sites such as financialplannerjobs.com, and association sites such as FPA and NAPFA. This is a good option for the do-it-yourself firm owner as long as the appropriate time has been taken with creating a standout job description. Sifting through résumés can be burdensome and, combined with the fact that candidates don’t often notify the host after they have secured employment, firm owners can find themselves getting their hopes up on someone who already has found a job.
Post an ad in a newspaper or industry publication. The majority of students don’t subscribe to these publications, although that is changing slowly. Because it isn’t cost effective to publish the full job description, summaries are usually posted, and firm owners could find themselves bombarded with inquiries from unqualified candidates.
Work with a coach, practice management consultant, or recruiter. For firm owners who have done strategic planning and want to outsource/ delegate, this can be a good option. If these people are doing their jobs, they know the needs of the business, the culture, work style of owner, skills required for success, etc., so it is an obvious place to start.
Utilize non-industry-specific online job boards such as monster.com and careerbuilder.com. Keep in mind though, if a firm owner is offering a true financial planning job within a firm that does actual financial planning, the posting is likely to be lost in the mounds of mass market securities, sales-oriented openings that have turned a lot of the top talent, who aren’t looking for that, away from these types of sites.

How Do I Know If It Is a Fit?

We have examined the strategy of the majority of firm owners when recruiting new planners and why it is not very effective when searching for candidates outside the industry, plus discussed other strategies for owners to consider as well. Recruiting at a basic level involves two phases. The first uses methods to find candidates, the next uses methods to successfully evaluate the candidate. The firm owners must have the right tools, knowledge, and processes in place to evaluate the candidates to help ensure there is a good fit. There is a belief that the degree of risk of a bad hire can sometimes be reduced if the candidate has someone who can “vouch” for him or her (although referrals for new planners will rarely include someone who can vouch for the candidate’s experience in an actual job that is comparable to the one being filled, as this may be the first job for the new planner).

Referral-based hiring may be an attractive method for finding someone who is already in the financial planning industry, who already has experience. However, firm owners must remember that there is a distinct difference between hiring a new planner outside the industry, such as a college grad or career changer, and hiring a new planner who has several years’ experience and is already in the industry. Instead of evaluating prior work experience, you need to evaluate a candidate’s prospective ability to be successful in the future. This can be difficult based on a referral alone.

Recent college graduates are a top source of professional talent according to the 2009 FA Insight Study of Advisory Firms: People and Pay.³ The word of mouth/network method of recruiting these types of candidates is far less effective when targeting this group, as previously discussed. This can be problematic for firm owners recruiting from this talent pool because it is difficult to reach a broad cross section of qualified candidates. For firm owners, it is much more difficult to know they have hired the right fit when they aren’t sure whether they selected from the full menu of available applicants and there is little evidence of the candidate’s job skills.

Here is a list of items firms can use to help determine whether the fit is right once the candidate(s) have been located:

Personality/work style testing—Many tools exist in this space, including Myers Briggs, Enneagram, DISC, Kolbe, and Profile XT. These are crucial in determining how the candidates think, what skills they have, what motivates them, their preferred working environment, etc.
Competency testing—This is critical when dealing with new planners because there is little consistency between individuals and schools. Writing, math, and financial planning technical exercises will provide a firm valuable insights into a candidate’s basic skill levels relative to successful financial planning.
Software capability testing—“Proficient,” a word often stated on a candidate’s résumé when describing skill level with software, is a subjective term. Firm owners must have systems in place that can accurately and fairly evaluate an applicant’s skills on the various software packages the firm uses.
Spend time with them outside the office if possible—Go golfing or something similar so you can truly get a sense for their morals, ethics, competitiveness, and focus.
Reference, background, credit checks—Realize that, just like anyone else, candidates are going to list anyone who can give them a good reference. If they don’t have any work experience, this is likely to be a professor who might offer a subjective reference at best, because they have a vested interest in getting graduates placed. Others may simply take a neutral approach giving owners nothing of value—owners need to be prepared to put on the financial life planner hat and ask open-ended, probing type questions to find out as much as they can about the candidate.
Last but not least—Follow your gut instincts! If red flags appear during your process of finding the right fit, investigate further. Skipping over them will only cause more time and financial hardships later.

A few years ago, Laszlo Bock, VP of People Operations at Google, was quoted in the New York Times saying, “Interviews are a terrible predictor of performance.”⁴ Firm owners must remember that although the standard interview is important in getting to know the candidate, it is the least effective way to determine a candidate’s attributes and probability of success in the position, and using supplemental tools in the interview process is critical in helping to avoid poor fits and eventually staff turnover.

Summary

The current environment for getting hired as a new financial planner is eerily similar to what it was almost 10 years ago, coming off the end of another severe bear market. It’s critical that we don’t repeat the last 10 years, but instead move the industry forward. A well known financial planning program director at a recent industry conference shared that his or her students overall were finding jobs, but they weren’t in financial planning per se. They ended up at mortgage, real estate, banking, and insurance-related companies.

If financial planning wants to grow its future, let’s take steps now to make sure the new planners have places to go upon graduation and we don’t lose their talent to other segments of the financial services industry. Remember, finding a fit is easy, but finding the fit is the challenge. The industry has to find a successful and consistent way to get the next generation of planners integrated within established firms so these new planners can learn, grow, and be ready once the reins are turned over. If we don’t, we are going to find that much of the knowledge, wisdom, experience, and talent will retire along with the profession’s founding generation.

Endnotes

Veres, Bob. 2010. “The Future of the Financial Advisory Business: Opportunities, Challenges, and Trends in the Second Decade of the 21st Century.” Inside Information.
Financial Planning Association. 2010. 2010 FPA Financial Planning Salary Survey. Denver: FPA Press.
FA Insight. 2009. 2009 FA Insight Study of Advisory Firms: People and Pay.
Hansell, S. 2007. “Google Answer to Filling Jobs Is an Algorithm.” New York Times. Retrieved from: www.nytimes.com/2007/01/03/technology/03google.html?ex=1325480400&en=b2fae74ca3982a94&ei=5090&partner=rssuserland&emc=rss.

Caleb Brown, CFP^®, will present “Everything You Wanted to Know About Hiring or Getting Hired as a NexGen Planner,” Sunday, October 10, at FPA Denver 2010. Visit FPAAnnualConference.org for the full program and registration.