RIA Firms Drop CFP Requirements in Most Hires, Report Finds
Most independent advisory firms are great at winning new clients, managing investments and helping navigate their financial lives. But recruiting, developing and hiring staff have been among the top challenges for registered investment advisors over the last several years.
The talent search strategy has often consisted of asking around to family and friends, wholesalers, custodians or an advisor from a study group. But as RIAs professionalize, that strategy no longer works. And a lot about what firms have assumed about hiring doesn’t hold up, according to a new RIA Talent Report from The Well Recruiting Solutions.
In fact, the report found that the best hires were not even looking. Of the 1,441 screening calls The Well made, 71% were with someone passively open or not actively looking for a new position. And among advisors the firm ultimately placed, 78% were not looking when first reached.
“If your strategy to grow your team of talent is posting a job on LinkedIn or Indeed, you’re missing almost all of the market and certainly the best of the market,” said Steven Perry, founder and CEO of The Well. “You have to be proactively reaching out to candidates.”
The RIA Talent Report is based on data The Well captured in a little over a year. That includes 1,441 recorded conversations, more than 110,000 logged activity events and a talent graph of 6,445 people across 49 states. The report also uses a small share of licensed industry data from FINRA, Kitces Research, Echelon Partners and DeVoe & Company.
While many firms believe their job descriptions are set in stone, the data show otherwise; a credential is the first thing to be negotiated away. In 84% of jobs that said they needed a CFP, the firm ended up hiring someone without the designation. In addition, the CFA and CPA requirements were waived in every case.
“None of this means credentials are irrelevant,” the report said. “It means the job description, as written, describes a firm’s opening position in a negotiation it has not yet had. Firms that write every line as non-negotiable spend longer filling the seat and see fewer qualified candidates reach a first call, because strong candidates who lack one listed item often screen themselves out before a recruiter gets the chance to correct the record.”
It wasn’t limited to designations. Firms also negotiated away book-size minimums, named software stack and a specific number of years of experience for candidates who were the right fit.
Another statistic to pay attention to is how few times the offer came in within the original salary range, Perry said. According to the report, 47% of advisor hires closed below the firm’s posted salary floor, while 30% closed above the ceiling. Only 23% fell within the posted range.
But that doesn’t mean RIA firms should low-ball new hires, he said. Rather, the salary must be aligned with the candidate’s experience and designations.
“Because that CFP gets dropped, because the 10 years goes to five, goes to three, then that makes sense,” he said. “You didn’t really need that. You thought you wanted that because you thought you wanted it. And then you realize, ‘I just really like this person. I think I can develop them. They’re a great fit for our culture. Their experience is good enough, but I’m not going to pay them what I was going to pay a 10-year CFP.’”
The study also found that firms are taking too long to hire, with candidates ending the search process slightly more often than clients do. Among the searches that don’t end in a hire, the candidate ends it 43% of the time via withdrawing, declining or failing to show. The client ends it 39% of the time, and the remaining 18% ends for another reason.
Perry said it takes The Well 55 days to close a search process, from the day they meet with the client to the day the person is hired. But only 14 of those days involve his team looking for candidates. The rest of that time is spent making a decision.
But each day spent waiting is lost revenue for the RIA due to those open seats. Perry said it can cost a firm $30,000 to $60,000 a month in lost revenue because you don’t have that person.
The report cites data from Kitces Research showing that one support professional ($100,000) can increase an unsupported solo advisor’s revenue from $234,000 to about $500,000. That would likely result in about $166,000 in additional EBITDA and lift the firm’s enterprise value. Bringing on a paraplanner ($130,000) and a service advisor ($175,000) increases revenue from $500,000 to about $1.158 million, resulting in roughly $325,500 more EBITDA.
“I really don’t think people understand how much it costs them every day, every month, for this role that they have done so much work to build the capacity for,” Perry said. “They’ve built the firm, they’ve built the platform, they’ve built a value proposition, they’ve found the niche. All of the hard work is now not getting realized because they don’t have the person there to capture those potential new clients.”
