The insurance and financial advisory industries are facing significant declines in producer headcount. Whether due to issues of demographics, economics or personal preference, the declines in insurance agents and financial advisors are clear. Robo-advisors or other alternatives may arise as future solutions, but in the medium term, distribution organizations are left to fight over a diminishing resource—licensed producers—in search of growth.
With that in mind, we’re launching a little four-part blog series on producer expansion in financial services. Over the next few weeks, my colleagues and I will share insight into how to attract, recruit, onboard and develop successful new producers.
With a declining population, not all firms can be winners in the producer growth game. But those that take a disciplined approach will have a leg up.
Part 1: Attracting Producers
Part 2: Optimizing Recruiting
Part 3: Onboarding Producers
Part 4: Managing the Agent Experience
A firm’s first step in growing its producer base is getting qualified candidates to show interest in joining. Before a firm deploys its recruiting engine, it first needs to understand what types of candidates to target and how to attract them. Whether looking for greenhorns who are new to broker or advisory roles or experienced producers, most firms rely upon the promise of future earnings as the primary attractor.
Some firms explicitly lay out earnings expectations as the core of their promise to recruits—as in this example from Edward Jones—while others use pay benchmarks, compensation calculators, commission grid comparisons or other tools to illustrate the competitiveness of their offering. Whatever the method, firms often lead (and close) with compensation as the foundation of their recruiting efforts. But should this be the case?
To better understand what motivates financial advisors (FAs) to choose a particular firm during the recruiting process, we surveyed over 150 financial advisors who were relatively early in their careers (all had less than 10 years in the business). In our survey we asked FAs: Why did you choose to join your most recent firm? Not surprisingly, “great earnings potential” came out as the number one factor (see Figure 1).
However, we did find it surprising that the nature of the work and the firm’s reputation trailed very closely to earnings potential as key drivers of choice. Furthermore, when we examined responses only from producers who had switched firms, we found those two areas and “high probability of achieving success” actually outranked earnings potential as key drivers. The experienced producers were more interested in reality than in the “potential” for greatness.
We also dug a bit deeper into “earnings potential” by asking FAs how they determined the earnings potential with a specific firm. Their answers (shown in Figure 2) surprised us: The firm’s reputation and product set outpaced the compensation plan as keys to assessing potential. Here again, we saw that FAs placed a premium on being able to realize their potential—and not just being shown enticing commissions at unattainable levels of production.
What does this all mean for brokers and advisory firms? We would advise three things for firms looking to attract more producers:
- Test your full offer on the market Look beyond compensation benchmarks to gain insight into how your brand, customers and products position you to compete for producer talent. An easy way to start is to test from within your own organization. Lay out the distinct component of your offer to producers and ask your current producers to allocate importance points to each component.
- Strike a differentiated position Know where your offer is strong (and where it is not), and seek out candidates who value your strengths. This will require at least some market insight. A good way to start is to begin tracking loss information for candidates who did not join your firm. What about your offer did not compel them to join?
- Make your offer ‘real’ Commission grids and pay benchmarks are insufficient to convince candidates of the opportunity at your firm; to the extent possible, aim to convey the experience of working at your firm, and how that experience translates into financial success.
Firms that are able to clearly communicate a differentiated and robust offer will be in the best position to succeed in the battle to organically grow their producer ranks.
In the next installment of this series, we will describe how to best use various recruiting channels to achieve even better results in producer attraction. Stay tuned for more.