Brokerages cut down on novice hires, turn to experience
NEW YORK (Reuters) - As brokerages search for ways to grow in a tight economy, many firms are cutting back on new adviser training programs and instead investing in experience.
"We've consolidated a lot of the hiring," Morgan Stanley's (MS.N) president of global wealth, Greg Fleming, said at the Reuters Wealth Summit this week.
He said that Morgan Stanley decided this year to cut the number of people it brings into its adviser training program by nearly 30 percent, to 1,250 adviser trainees per year, from 1,750 trainees.
On average, about two out of 10 in a typical training program will be successful and start a career at a firm, said Danny Sarch, a financial services recruiter based in White Plains, New York. Brokerages facing tighter budgets are weighing that with the greater certainty that comes with hiring an experienced adviser, Sarch said.
"Morgan Stanley, from their Dean Witter routes, had always been aggressive in hiring young trainees," he said. "It's becoming tougher. You don't see entire trainee offices anymore."
Jim Weddle, chief executive at investment firm Edward Jones, said the new financial adviser joining his firm is, on average, a career changer who is 37 years old and 10 to 12 years out of college. He said the firm recently raised productivity requirements of some of its advisers, and revamped its compensation plan.
"If you're recruiting better people who have been more successful in the past, you have to be willing to pay them," Weddle said.
Ameriprise Financial's Don Froude, president of the firm's Personal Advisors Group, also he expects his firm to recruit more heavily from the pool of seasoned advisers.
"Our model now, instead of bringing in the novices, is now recruiting experienced advisers," he said. "People who are coming into the franchise now are people who are coming from other businesses."
The strategy makes sense given the changing environment in wealth management, Sarch said. For one, advisers' clients have become more sophisticated over the past decade. Add to that the rise of mutual funds, exchange-traded products and novel investment vehicles. Together, it has created a stronger need for more experienced advisers, Sarch said.
An adviser's client base is largely built on long-standing relationships between the adviser and his or her client. That's true for both career-changing advisers and those who have built their client base for years.
David Drucker, a veteran Wall Street adviser who spent his early advising career at Morgan Stanley Dean Witter, said the bulk of advisers he sees in the industry now are between the ages of 30 and 50. He sees the focus on building up more established advisers as a positive.
"They (firms) have to give more support to the people who are paying the bills," Drucker said.
(Reporting by Ashley Lau; Editing by Jennifer Merritt and Walden Siew)
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