Independent advisory firms will continue to step up recruiting efforts this year, according to Charles Schwab. The firm offered guidance on how to recruit at a workshop in New York.

Independent advisors who will be recruiting to grow their business this year - and there will plenty of them, according to Charles  Schwab - should start the process with their own staff, according to Gabriel Garcia, managing director, business consulting for Schwab.

“Who would you hire on your existing team? Who would you hire enthusiastically?” Garcia asked during a workshop on recruiting new advisors in New York. “Now use those choices to help you screen who you’ll hire when you go outside the firm.”

The reason is fundamental, according to Garcia. “Whoever you hire will change the firm’s culture and the way your team works. It’s one of the most important business decisions you’re going to have to make.”

As a result of the market downturn in late 2008 and early 2009, advisors have increasingly been turning to recruiting from wirehouses and independent contractors to make up for lost revenues, a trend Garcia said he expects will continue this year. Last year Schwab tallied 172 advisors who turned independent. Slightly less than half (42 per cent) joined an existing firm and 58 per cent formed their own firm, according to a Schwab study.

The first challenge facing firms recruiting from other platforms will be education, Garcia told advisors at the workshop. “People are completely unaware of how you service clients,” he said. “You’re going to have to communicate your firm’s unique culture and vision, and you’re going to have many, many conversations and kiss a lot of frogs,” Garcia said.

To find the prince among the frogs, recruiting firms need to know who they’re targeting and why, Garcia said. “Do you have a capability gap?” he asked advisors. “Do you want to add to existing services? Are you hiring to replace revenue, as part of a succession plan, or just being opportunistic to take advantage of the market?”

Candidates have to be given the firm’s value proposition, Garcia stressed. “For some advisors, a turnkey proposition is a tremendous value,” he said. “Others may be attracted to operational and technology expertise, a staff, an established compliance process and, of course, the potential for improved compensation and equity.” Candidates should be informed early in the recruiting process if equity is in fact involved, Garcia said.

However, “Schwab is a big believer that equity shouldn’t be offered upfront,” he cautioned. “It’s much better to determine if candidates really want equity or simply the opportunity to create wealth.” Garcia strongly urged firms to develop a recruiting pitchbook that includes a firm profile, value proposition, ideal client profile and non-monetary benefits.

Tactically, personal contacts and networking through colleagues, vendors, clients and centers of influence remain the best recruiting referral sources, he said. Garcia also urged advisors to make sure they have defined their own business strategy, and ask themselves questions such as whether they want to be a market dominator or a lifestyle practice and if they want to expand service capabilities and/or the firms’ geographic footprint.

Other critical strategic issues, he said, include defining target clients and their advice and service needs, business goals such as assets under management growth, revenues, total clients, profitability and productivity metrics.