Surprise! Tech-Enabled FA Recruiting Beats Expectations

Pandemic-Driven Digitization of FA Recruiting Continues to Transform the Industry


Just before March 2020, the financial advisor recruiting marketplace looked unchanging and predictable, at least for independent dual registrant firms.

Roughly half a dozen of the largest firms with an independent broker-dealer and corporate RIA – LPL Financial, Raymond James, Cetera Financial Group, Advisor Group, Ameriprise, Commonwealth and Cambridge – looked set for unchallenged recruiting dominance. In times of isolation, changes in recruitment process are never isolated.

Meanwhile, or so the thinking at the time went, mid-sized and smaller firms would need to fight hard for lower quality recruits, while occasionally bagging a large practice or successful ensemble team.

And then the pandemic happened. And with it, came a fundamental reshaping of many of the core dynamics that have defined recruiting until recently – Changes that are still playing out in real time, with significant long-term effects on firms and advisors throughout the wealth , management space.

The Slump That Never Happened

According to Jeff Nash, CEO & Founder of BridgeMark Strategies, a national consultancy focused on financial advisor recruiting and transitions, “When the pandemic first hit the country, there was an immediate freeze in recruiting movement in the months of March and April 2020. But what followed was a strong increase in recruiting that has lasted well into this year.”

This is in stark contrast to general assumptions that recruiting would be significantly slowed down or even nonexistent until in-person meetings and conversations could once again take place.

In fact, multiple third-party recruiters agree that not only has recruiting not slumped, but the recruiting process has become more efficient since the spring of last year.

Nash said, “The speed to transition a book of business during the worst of the pandemic actually increased. Advisors were more successful moving their clients more quickly.”

So what enabled recruiting to hit its stride over the past 17 months? In a word, technology.

Web-based video collaboration tools (especially Zoom and MSFT Teams), digital account opening and onboarding solutions, to automated data migration and AI-driven back office solutions, have changed the recruiting paradigm.

“In the past, advisor recruiting has typically been done through different website and contact forms, followed up by way of manual discussions and document exchanges,” said Sindhu Joseph, Ph.D., CEO of CogniCor.

Joseph, whose company delivers artificial intelligence-driven solutions to the wealth management space, including virtual assistants that drive scalable back office operations, notes “Many warm contacts go cold in this process due to lack of proper follow-ups and human error.”

And unfortunately for the financial advisor, once the transition process commences, longer it takes, the greater the negative impact on the advisor’s ability to generate revenues and grow the business.

Leveling the Recruiting Playing Field

One of the first changes that has been brought about through a greater digitization of recruiting is a leveling of the recruiting playing field to some extent between large firms and mid-sized as well as small firms.

Mike Nessim, CEO of Kingswood US, said, “Mid-sized and small firms that showed foresight when it comes to investing in their technology before the pandemic definitely reaped the benefits when so much of the recruiting process went digital as of last year.”

According to Nessim, whose New York City-based firm has swelled from 35 financial advisors two years ago to 200 financial advisors across the country supporting $2.5 billion in client assets, “Firms with the tech tools and resources in place to seamlessly pivot to a digital recruiting environment were able to significantly level the playing field against the largest firms in our industry.”

“When everybody is working on a largely virtual basis the prospective advisor recruit’s attention When everybody is working on a largely virtual basis, the prospective advisor recruit s attention will naturally gravitate to service, senior level attention and culture. These are areas where midsized and small firms tend to have a very strong story, especially compared to the mega-firms.”

New Advantages for Hybrid RIAs and Super-OSJs?

Independent Super-OSJ groups and hybrid RIAs are also benefiting from a landscape where size might not matter quite as much as it used to when it comes to the recruiting process.

One example of the latter is Las Vegas-headquartered AmeriFlex Group, a hybrid RIA with nearly $5 billion in assets, that recruits independent advisors to its platform, offering equity in the firm in addition to a range of practice management solutions to sweeten the firm’s appeal to prospective recruits.

According to the firm’s CEO, Thomas Goodson, over the past 16 months, AmeriFlex brought aboard 25 financial advisors, increasing the firm’s total advisor ranks to 77 – A 50% increase in advisor growth.

Goodson attributes a big part of his firm’s recruiting success during this time period to the work he and his team did in providing transitioning advisors with tools to do much of the paperwork digitally, while also leveraging both virtual “get to know you” meetings as well as workflow software to track each step of the transition for recruits going through the process. “

At the end of the day, if you have a value proposition for financial advisors they will move – If you can make the transition as easy as possible. The quickness of the transition with our group is an important feature of what we offer,” summarized Goodson.

What Made Digitization of Recruiting Work Over the Past 18 Months?

So what worked especially well in this most recent round of digitized FA recruiting?

BridgeMark’s Jeff Nash points out that the biggest hurdle that firms and advisors cleared was attitudinal.

“The ability of firms to adjust to an all-digital normal and the willingness among advisors to accept the adjustments worked far better than most expected. Prior to March 2020, if we told advisors they would evaluate and change firms without ever meeting anyone, and then also have only remote support for the work that was required upon the change, most of them would not have believed us.”

Kingswood’s Mike Nessim also said the pandemic-related lockdowns helped further drive adoption of the digitized advisor recruiting experience.

“Financial advisors who never moved firms because they didn’t want to be burdened by the paperwork, and they didn’t want the hassle of chasing down their clients found this silver lining in the pandemic: Everyone was home.”

“It was easy to get advisors or their clients on the phone when we needed them to sign forms and complete other transition-related tasks.”

In Nash’s perspective, the smoother than expected pivot to digitized recruiting was driven in large part by the fact that many of the technology tools that were critical to this transformation have already existed for some time – They simply weren’t being fully leveraged.

“Tools that have been around for years that ease doing business absolutely increased market share for firms that actually used those tools. Here are two key examples: Docupace for data migration and Docusign have each been around for some time.”

“They each deliver a crucial service, and they each have been under-utilized in the traditional recruiting process. Data migration and e-sign are only going to continue to surge in importance for firms and the advisors they recruit. Fully adopting these tools helped firms move advisors more quickly, and helped advisors move their clients more rapidly throughout the worst of the pandemic months.”

The Complexities of Data Migration

While moving to e-sign capabilities is relatively straightforward, data migration – a crucial element of any transition process – is significantly more complex.

According to David Knoch, CEO of Docupace, a workflow automation provider whose Transition Solution has provided data migration solutions to the advisor recruiting process since 2016, the data migration challenges are three fold.

First, data is ubiquitous, across multiple separate platforms, including CRM tools, data aggregation solutions, portfolio accounting, transfer agent systems and custodial platforms.

Second, in Knoch’s view, “Data isn’t normalized. Assuming you can find the data, is it universally used and formatted across the data sources?”

And third, most DIY data migration solutions are fundamentally “manual and laborious,” according to Knoch, resulting in significant timespend without minimizing risks for human error.

In Knoch’s perspective, “When all this comes together, clients and financial advisors get anxious about a move to a new firm or custodian. Advisors build their brands on service, and when their clients have to participate in the transfer by providing data they’ve already delivered, or experience other inefficiencies, the service brand advisors have worked hard to build can be put at tremendous risk.”

Docupace addresses these three key data migration challenges by starting with the assumption that, in Knoch’s words, “Data is everywhere.” Docupace’s support teams actively work with advisors in their data sourcing efforts, training them on how to use the systems they have to extract the data necessary to facilitate a seamless transition process.

Next, the firm solves for “data normalization” by partnering separately with the firms bringing aboard new advisors to establish the data validation rules and forms required for a transition.

“By working with the data we help the advisor obtain through data extraction – only when the clients have consented – we can normalize the data, not only across various data sets and field uses, but also across the receiving firm or custodian’s unique business rules.”

And third, Docupace leverages its digital forms filling capabilities to address the highly manual, paperwork-driven features of most recruiting processes.

Making Data Migration Work

Docupace also argues that it is difficult to make data migration happen without extensive partnerships with multiple key service providers across the industry, from third-party recruiters, to e-signature providers, to new account onboarding integrations with nearly all of the industry’s custodians.

Certainly, the numbers would suggest Docupace’s strategy and service model are working.

Since its launch in 2016, Docupace’s Transition Solution has helped to move over half a million accounts, representing a total of $31 billion in assets.

Beyond volume, the company is also showing the promise of efficiency and speed that is ideally at the core of recruiting digitization, typically transitioning 72% of an advisors’ accounts in 30 days or less, with the 13% balance of accounts usually transitioning in the next 30 days.

Digitized Recruiting in the Back Office

Aside from data migration, the digitization of recruiting will also require a greater focus on supplementing manual back office service models – notably, traditional call centers – towards AI-driven solutions that can readily scale up to accommodate a large inflow of new recruits.

Sindhu Joseph of CogniCor underscores that her company’s virtual assistants were able to do just that since March of last year.

“Support centers feel a lot of pressure when there are large inbound groups of new advisors. In a remote setting where the support personnel don’t always have immediate access to subject matter experts, our AI-driven virtual assistants filled the gap by providing contextual knowledge to support personnel.”

“Another example of where our AI-driven digital assistant solutions can augment traditional call centers and support centers is with onboarding status updates. Using our solution, firms are able to provide a clear and precise status update any time an advisor asks.”

Joseph stresses that when transitioning advisors with specific and time sensitive questions about the status of their move are greeted with long wait times on the phone, the frustration that results can be intense.

“If advisors going through the recruiting and onboarding process are forced to wait half an hour to two hours on the phone to get answers, they are going to get very frustrated – And the firm will not be off to the best start with its new recruit.”

Will Digitization of Recruiting Be Permanent?

From early May through July, there was a clear wave of enthusiasm for going back to work in the traditional sense among many wealth management firms and the independent financial advisor businesses they support.

In many instances, this included envisioning a return to in-person home office visits and other meetings that are part of the recruiting process.

However, the recent spread of the delta variant of the COVID virus and continued broader uncertainty means a continued robust work from home approach will almost certainly be permanent. And with it, many elements of digitized recruiting will remain part of the picture as well.

Moreover, attitudes about going virtual with many aspects of recruiting have now become more mainstream than ever.

According to Kingswood’s Mike Nessim, “Many people are OK with doing meetings via Zoom, Teams or WebEx, but little by little the desire for in-person interactions is starting to come back as well. I think we’ll eventually get to maybe 50% of where things were before with in-person meetings.”

“I can see our firm, for example, still using virtual channels for initial meetings with a prospective advisor, but then going in-person to meet them when we’re ready to finalize their recruitment.”

Janeesa Hollingshead, Senior Editor, can be reached via [email protected]