Training: Not only for rookies

On-the-job mentoring was a luxury when many of today’s advisors began their careers.

“When I started I had nothing; I didn’t even go through a training program,” says Sybil Verch, who started as an assistant in 1994 and became an advisor in 1999.

Being on her own was scary: “I didn’t have an admin assistant. I didn’t even get a base salary. I went 100% on commission, and it was sink or swim,” says Verch.

She hired an assistant after one month, but had no idea how she’d pay her salary. “I thought if I had to go into debt for a year to do it, so be it,” says Verch; luckily she didn’t have to.

By 2001, Verch had received guidance from mentors and accumulated $60 million in assets. Today, she’s senior vice-president and national director of wealth management at Raymond James in Victoria, B.C.

Her success story largely represents a bygone era. “Gone are the days of the stand-alone financial advisor trying to do it all,” says Verch. Instead, she sees more up-and-coming advisors entering the industry as part of an existing team, rather than as independents who have to build from the ground up.

Verch has led Raymond James’ new advisor training programs over the last year and she finds today’s trainees need more than one assistant and training on trading. Nowadays, Verch says, “The value-added for clients is not as much on the portfolio management side—you can outsource that. Instead, the biggest value-added service is behavioural and financial coaching.”

This reality, along with developing regulatory and industry challenges, creates hurdles for both current and budding advisors. But, says Verch, the latter have a particularly low success rate—in her experience, only one in five new advisors is in business after five years. On top of that, the number of firms registered to trade securities has fallen since 2008, from 210 during that year to 166 as of mid-2017, according to the Investment Industry Association of Canada.

One way to shore up the industry is to better train and support advisors, be they new to financial services or new to your team. Here, we offer tips for advisors running their own programs; see “The back-to-school approach” for more on structured training by large firms.

Training techniques

Training is required whether you hire young advisors or experienced financial professionals, says Kathy McMillan, advisor and director of wealth management at Richardson GMP in Calgary, Alta. That said, training someone from the ground up requires more time.

The first step in both cases is for new team members to learn about relevant processes and systems, says McMillan, which is often done through e-learning modules. If a hire must also get his IIROC license, there’s IIROC’s required 90-day supplemental training to consider; that takes up a few hours per week.

From that point on, there are differences. It typically takes three years to train rookies, McMillan points out. The overall process is this: “For the first year you come to me, you’re in administration, a development position,” she explains. “You try and keep your head above water,” and learn all about the firm and the team’s processes.

Then, “in the second year, I expect you’re taking command of that position,” McMillan says, and “in year three, I want you to be redesigning your position.” In other words, she expects people on her team to start specializing in their third year based on their skill sets, be that client service or portfolio building.

As a manager and mentor of a newer advisor, “you have to have patience,” she suggests. “You have to see where people’s talents are starting to lie and allow them to develop those talents,” which leads to young advisors seeing more opportunity and flexibility at their firms.

Over the last decade, McMillan’s hired two people in their early 20s, training them extensively and encouraging them to get extra designations. One has specialized in event planning for the team because she has a background in hospitality, while the other is client-focused.

For the most part, however, her firm prefers to deal with experienced hires. “Richardson GMP likes to hire senior advisors out of different firms; advisors that come with maturity and assets so they also become a partner,” she explains.

One reason: experienced hires can start at the second or third training step, and it typically takes no more than a month to get them up to speed—though it can take longer for them to mesh with their support team.

McMillan recently hired Jamie Ryan, an advisor who had worked at a major bank for nearly 10 years as a financial planner before deciding to pursue his IIROC license and focus on client service. With Ryan, McMillan could jump straight to the third step by introducing him to clients and grooming him to build his own sub-team.

Already, she says Ryan and his colleague Karla Sampson “are the base of our succession team.” Sampson, currently an assistant, will focus on research and trading, says McMillan.

Ryan, who began pursuing his IIROC license as soon as he was hired in June, says he’s undergone module-based training to learn about the firm along with his 90-day mandatory training. As of August, he says, “Most of the learning so far has been informal but immersive. Kathy brings me into every meeting.”

He hasn’t felt like a third wheel, he adds, because Kathy candidly explains his role at the firm and at those meetings. “Clients really warm to the story and they’re glad to hear about me from a succession planning standpoint.”

For both types of hires, make them feel a part of the team from the beginning, says McMillan. She leads weekly group meetings, as well as one-on-one discussions and training sessions. During group meetings, the team discusses projects and challenges openly, sharing lessons they’ve learned from dealing with clients. They also go on group retreats twice per year.

For compensation, McMillan offers different splits between salary and commissions. Her newer employees are on salary with stock bonuses, while the longer-standing team members typically get a base salary with a percentage of commissions.

Make no mistake: it’s tough to find and retain people who fit your team, connect with your clients and will be dedicated to your business, McMillan cautions. For most new advisors, she or a team member must spend a couple of months working side-by-side with them. Then, she says, the new advisors can work independently within the team; their work is monitored. That’s a lot to take on. So McMillan predicts more firms, including hers, will introduce formal training programs that help facilitate the process.

The back-to-school approach

Large firms often offer structured, classroom-type training programs.

Take BMO Nesbitt Burns, which offers both a basic training program and a mentorship program for developing advisors. The basic program, which lasts two years, targets “those who are making a career change from a different role in financial services and are interested [in] wealth management and client service,” says a BMO spokesperson. It focuses on teaching new hires to build a business and connect with clients. Participants also receive seven years of what BMO calls compensation support: “It is not a salary but a consistent commission payout assuming our levels of new business growth expectations are being met,” says the spokesperson.

The mentorship-focused program involves pairing new advisors with more experienced colleagues who also work at the bank. After three or more interviews with interested advisors, a mentor and mentee are matched. The mentee works in the mentor’s practice one day per week for a set period. The goal is to have them trade tips and skills. The program may also lead to seasoned advisors grooming potential successors, since the mentees prospect for and serve clients.

However, BMO says that mentees can also choose to break off once they’ve helped the advisor bring on a predetermined AUM amount (this amount is the same for all mentees in the program). If mentees choose to leave their mentor but stay with the bank, the clients they’ve prospected are theirs.

Sybil Verch, senior vice-president and national director of wealth management at Raymond James in Victoria, B.C., says her firm is set to launch an advisor internship program. The idea behind the program is new advisors will get classroom and online education, as well as partnerships with senior advisors. That way, “they can build their own business while getting the added benefit of some practical experience and training.”

Also, “a number of our senior advisors want to be more engaged with our new advisors from a succession planning perspective,” she adds, noting successors should be chosen five to 10 years before retirement.

Raymond James had previously offered two distinct programs: a new advisor development program and a smaller mentorship program. The new program, Verch explains, “will take the best elements of our previous two programs, plus add in a few new twists.”

The previous development program was designed about three years ago for aspiring financial advisors who had already completed their Canadian Securities Course. The main goal was to offer both financial and educational support to new advisors throughout their first five years. Raymond James offered a base salary for the first two years, and “a guaranteed 40% minimum grid level” for all five years, says Verch. For each year, advisors were given an AUM target, starting at $4 million by the end of year one.

The firm’s mentorship program, she notes, was for candidates who already had experience and a licence, but who needed help building their businesses.

All for one, one for all

Another reason firms may formalize their training is to make it easier for experienced advisors to find successors.

After all, the industry is facing a demographics crisis—the average age of advisors is around 50.5 years old, according to Investment Executive’s 2017 Report Card series. Even more alarming, only 9.6% of the 1,704 advisors who provided their age were under 35, compared with 13% of the 1,912 advisors in 2008 (see “For survival of the industry”).

And it’s not enough just to attract younger recruits. To make sure rookies want to stay on as successors, advisors and firms must adopt collaborative, mentorship-based cultures.

Ryan Cramp knows all about this. For nearly 20 years he has worked at Raymond James in Victoria, B.C. He didn’t go through a formal training program, but he’s helped build a team that values mentorship.

Cramp progressed from being a registered rep in 2001, to becoming an associate investment advisor in 2005 and, finally, a portfolio manager (PM) in 2014. He was mentored the entire time by advisor Chris Raper. Cramp also picked up his CIM, options, and insurance licenses along the way. He became Raper’s partner in 2014 after earning his PM license.

At that point, says Cramp, he purchased an initial ownership stake in Raper’s practice, which increased in 2017.

Together, he and Raper manage a team of six associates. One of the cornerstones of their process is they never conduct one-on-one client meetings, preferring to use a buddy system where each team member has a partner they work closely with. That way, clients have multiple points of contact (see “Create a stronger succession plan”).

As a result, Cramp and Raper have built a system where all members of the team act as mentors. “We’re pretty tight-knit,” says Cramp. The team meets every morning to discuss the day’s schedule and pass on any lessons they’ve learned.

The team is also transparent about compensation. “Every quarter we put together a spreadsheet outlining all of our income,” says Cramp. The spreadsheet also includes all expenses, including everyone’s salaries. That way, everyone can see what it takes to run the business, he adds.

What’s more, all teammates are part of a profit-sharing program. The six associates, who also receive salaries, are included to help them think like business owners. That differs from the common industry model for rookies: a salary with stock bonuses or a percentage of commission on top, with pay becoming commission-based over time.

The team’s commitment to transparency and mentorship evolved gradually. It all started when Raper wanted to spend more time evaluating investments. To make that happen, he began involving Cramp, who was then four years into his advisor career, in client meetings.

“Chris found that helpful—I would do up the notes and follow up on items,” says Cramp. By 2008, “[It] got to the point where he said, ‘I’m no longer doing any more meetings without Ryan,’ ” says Cramp. From then on, Cramp went to Raper for tips and with questions, and they found they were learning from one another.

That led to the buddy system, says Cramp, and “we’re now at the point [where I’m] getting other staff members involved in meetings.”

As you train new advisors, it’s also important to help them specialize—for the good of your team and clients, and to boost retention. Take Raper’s associate John Bataller, who started out as an assistant and worked his way into trading. “He’s an incredible systems builder, but he’s also expressed an interest in expand[ing] his knowledge on the client service side,” says Cramp.

Cramp is happy to let his team pursue their passions, as Bataller aims to do. So far, “the business has not yet grown to the point where we can relieve [John] of his trading-related duties,” says Cramp, who finds it’s important to balance business growth and team growth. Still, while Bataller’s “first priority at this point is the trading, he helps the client service team out when he’s not busy.”

Properly training, integrating and inspiring rookies is worth the effort. In doing so, you’ll find two things: the next generation of advisors will bring a lot to the table, since they’ll likely better understand technology and connect well with the next generation of investors; and they’ll be more receptive to learning from veteran advisors who have decades of client-service and investment management experience to pass on.

For survival of the industry

It’s no secret the industry is aging.

The average advisor across the broker, dealer, bank and insurance channels is 50.5 years old, has spent 20 years in the industry and 12 years at his or her current firm, according to Investment Executive’s 2017 Report Card series. That points to a lack of young advisors in the industry. In fact:

• only 9.6% of the 1,704 advisors polled who provided their age were younger than 35, compared with 13% of the 1,912 advisors polled in 2008;
• 38.6% were between 35 and 50, compared to 51.8% in 2008;
• 43.5% were between 51 and 65, compared to 31.9% in 2008; and
• 8.3% were 66+, compared to 3.3% in 2008.

Team diversity is also an issue.

• Female advisors make up only 21.7% of all of the advisors polled.
• Women are represented most in the bank channel at 45.3%, followed by the insurance (20.5%), dealer (17.6%) and brokerage (13.5%) channels.