Staffing & Culture | 06.28.23
In Advisory Talent Competition, Banks Need To Get Their Act Together
Employee retention has never been more of a pivotal issue. The heads of bank wealth management programs are confronting it day in, day out, with hits, misses and more than their fair share of turnover.
In terms of the past five years, a period which included a global pandemic and related, seismic, industry paradigm shifts, well, let's just say the headcount picture could be worse.
Going forward, and looking ahead five years, things need to get much better.
That's the conclusion of a landmark May 2023 research report compiled by the BISA Research Committee in conjunction with Cerulli Associates, titled "Improving Recruitment and Retention Throughout Advisors’ Lifecycles: Uncovering Opportunities and Best Practices Within Banks."
And while shifting dynamics and competing business models are putting pressure on banks’ and credit unions’ ability to attract and retain advisors, the bank channel's relative headcount actually slightly increased over the past half-decade, growing at an annual rate of 0.7%.
Underscoring just how important this issue is for bank advisory programs, the BISA/Cerulli researchers have forecast that, over the next half-decade, advisor headcount growth will turn negative.
"Many banks and credit unions have neither effectively retained their most experienced advisors, nor attracted a new generation of talent to fill their places," the report said.
Foot Traffic Ebbs, Flows, Allures
Physical branches might seem less relevant in the age of smart phone apps but they still loom large in the conversation about how to attract younger advisors to the industry.
While bank and credit union foot traffic has been perceived as waning since before the pandemic, some of the current data actually shows a hard-to-pin-down pattern of continuous ups and downs with no noteworthy changes, even during the course of this past spring with regional banking struggles making headlines, according to Gravy Analytics.
Regardless of whether in-person branch visits return to pre-pandemic levels, advisory program leaders and their recruits affirm that being at a physical location definitely has its advantages.
"The consistent flow of referrals from other personnel within bank branches, sourced from qualified, existing bank clients, represents a highly compelling and unique selling point for joining a bank or credit union wealth management program," the BISA/Cerulli report said.
Front-line retail bankers enjoy key relationship manager roles. It's an ideal early career rung for newer professionals, many of whom, having only just entered the business, either lack the abilities to build a book entirely from scratch or don’t feel comfortable marketing themselves to their personal network of family and friends, the BISA/Cerulli report said.
"The bank channel offers a worthy compromise, providing motivated advisors with a stream of warm referrals in exchange for a slightly less competitive grid-based payout," the report said.
According to recruiting website ZipRecruiter, the average annual pay for a wealth management advisor in the U.S. is $126,255 a year.
Of course, money isn't everything.
Technology Increasingly a Factor
Recruiting the best and the brightest means never having to say you’re sorry — for a bank’s clunky, antiquated systems.
According to the BISA/Cerulli research, more than half (52%) of bank executives and advisors are dissatisfied with their firm’s technology.
“Not only do outdated legacy systems make advisors’ jobs more onerous, but often these pain points are passed through to the clients,” said Chayce Horton, a Cerulli research analyst. “Banks need to be able to compete with other advisory channels, such as the registered investment advisor (RIA) channel, which has outpaced the broader wealth management industry in terms of AUM and advisor headcount growth,” he added.
The paper finds that attrition risk presented by aging advisors is considered one of the greatest threats to bank wealth programs today. Bank advisors, on average, expect to retire at the age of 64 (four years earlier than peers in other channels); yet nearly one-third (29%) of bank advisors transitioning into retirement within the next ten years are unsure of their succession plans.
“Banks will need to develop a two-pronged approach to retain advisors at the later stages of their career while also finding and developing rookie talent,” the report said.
Call To Action
Smaller banks have their work cut out for them in trying to compete with larger entities with sizable built-in brokerages and aggressive marketing.
Third-party partners — for investment, brokerage and technology — can help.
Small institutions report their share of challenges grappling with these kinds of areas, which results in many of them seeking out third-party marketers (TPMs) to better address them.
After all, the wealth management market is too large to ignore, McKinsey's Jill Zucker recently told Financial Advisor IQ. The convergence of depositors and money management has been driven by demand for a “one-stop shop” where banking, wealth management and financial planning are bundled together.
Zucker cited a 2021 McKinsey poll of more than 10,000 affluent households. It turns out the percentage of individuals saying they want to be advised by a single institution increased to 22% in 2021, from 13% in 2018.
Homegrown marketing initiatives to garner more "wallet share" are not to be overlooked. A small community bank enjoys unique ties to its client base; and there’s no shortage of homespun networking approaches, like shredding fests, contests, even wine tastings.
"It is incumbent upon us all to be an active participant in the advisor evolution so that we can understand the critical drivers for advisor headcount expansion and retention," said John Olerio, senior managing director/head of Webster Investments and chair of the BISA Research Committee, and who wrote the report’s forward.
"More importantly," he writes, posing a billion-dollar question from 40,000 feet. "How can we proactively shape the future by providing the most relevant programs and support to attract premier talent to bank and credit union wealth programs?”
No one is saying the industry isn’t up for this challenge.
The BISA/Cerulli report covers a wide range of additional — and not always obvious — factors that go into formulating an optimized game plan for recruiting.
To find out more and obtain a copy of this report, click HERE.
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