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Smaller Firms Resist Formal Training Programs: Study

By Thomas Coyle April 28, 2015

When financial advisors quit a firm, it’s rarely because of inadequate training and team development. So says the 2015 Trends in Adviser Compensation and Benefits study released last week by the Financial Planning Association and FA-IQ. But the report also suggests most firms take an informal approach to training and mentoring, both of which decidedly contribute to overall job satisfaction.

One explanation for this apparent contradiction is size. Formal training programs are the province of big firms, according to Mark Wilson of Tarbox Group in Newport Beach, Calif., which has four advisors, two support staffers and more than $400 million under management. Lacking the infrastructure (and budget) for dedicated training programs, boutiques such as Tarbox Group opt for on-the-job training, he says. “That fits how we work,” he adds. “We always meet with clients in twos — so newer advisors get to be in on those meetings, and it doesn’t stand out as training.”

As a reason for leaving a firm, “a lack of training opportunities” resonated with just 1% of decision makers and 2% of rank-and-file staffers among the nearly 700 financial-advice professionals who took part in the FPA/FA-IQ survey in February. Nearly half of the respondents worked at independent RIAs and dual registrants. The implication is that advice firms are doing something right, even if it’s on an ad hoc basis.

At Tarbox Group, besides ongoing mentoring, the firm pays for new FAs to get the Certified Financial Planner designation — not an inexpensive commitment. “We view it as a minimum for the role,” says Wilson, a former CFP instructor. The firm also springs for advisors to attend local and national conferences, which can advance their continuing education.

Further, in the name of team development and overall cohesion, Tarbox staffers go on expense-paid annual retreats at upscale resorts. These three- or four-day sessions include “a lot of downtime in travel when we exchange the life stories we just don’t always have time to share at work,” Wilson says. But team members also get chances to tackle pressing work issues. Once, an innocent question from “someone in operations” about an investment tenet led to “substantial changes” in the way the firm manages portfolios, according to Wilson. Another time, a policy discussion got so heated that one staff member refused to travel back with the team. “She left us within six months,” he adds.

Michael Marciniak

However well firms like Tarbox Group get by with informal training and team development, they’d do better to establish more structured processes, according to Michael Marciniak of advisor-training firm Advisors Ahead. And though it’s in his business interests to say it, he’s persuasive on how winging it can get firms in trouble.

With FAs well over 50 years of age on average, firms can’t — much as they might like to — hire only “older white males with established books,” says Marciniak, a former branch manager with Smith Barney. Such candidates are expensive to bring on, and they might not be long for the job. However, firms that want younger advisors run the risk of wasting time and money on hires who don’t cut it.

In particular, Marciniak says firms need help making sure novice advisors can function as effective team members. Further, if handled right, formal training processes can support principals with succession planning. As he puts it, founders of firms that hire well-trained, team-oriented neophytes “don’t have to retire.” Instead, “they can repurpose themselves” as rainmakers while younger colleagues mind the shop.

Veterans Only

Nevertheless, as the FPA/FA-IQ study suggests, many small- and medium-size firms prefer to follow their noses when it comes to training and mentoring — whether it’s a function of culture, as with Tarbox Group, or a reflection of a particular approach to the marketplace.

For instance, training is entirely on the job for new FA hires of Fieldpoint Private, a hybrid wealth firm in Greenwich, Conn., that manages over $3 billion. But then, as the firm’s marketing chief, Michael White, tells it, its advisor force is uniformly veteran. “Our new hires are very experienced, and they come in sharing our whole-balance-sheet philosophy,” he says, referring to Fieldpoint’s policy of focusing equally on its ultra-rich clients’ assets and liabilities. “They hit the ground running, and we make sure all systems are in place for them.”