Recruiting advisors in wealth management has proven extremely competitive this year, especially given the talent shortage created by an aging workforce and leaky early-career pipelines for the profession. Jennifer Povlitz, division director of U.S. Wealth Management at UBS, discusses what firms are doing to attract top advisors in this environment.
Transcription:
Victoria Zhuang (00:10):
Good afternoon and welcome to the Arizent Leaders Forum, a place where innovators and senior executives discuss some of the most pressing issues of their industry. I'm Victoria Zhuang, Reporter at Financial Planning, which is a publication owned by Arizent.
And the topic of our discussion today is what firms in wealth management are doing to attract top advisors in a highly competitive talent market this year, and what are some of the latest trends in recruiting? We know the advisor population skews older with the average advisor being in their mid fifties and many are retiring out. We've also seen research from Cerulli Associates that shows high attrition rates for younger advisors. With the shortage of qualified talent out there, recruiting good advisors is a top priority for many firms.
So I'm here with our guest, Jennifer Povlitz, division director of U.S. Wealth Management at UBS. Jennifer oversees half of the wealth management markets and financial advisors in the U.S. And UBS, as a wirehouse broker-dealer, is a frequent recruiter of high net worth and ultrahigh net worth advisors. So Jennifer, thank you for joining us today. And to our audience, please feel free to ask questions at any time and we'll try to get to as many as we can at the end.
Okay, so let's begin. Jennifer, tell me about the state of recruiting advisors in wealth management today. What trends have you noticed in advisor recruiting this year that are different from what you've seen in the past? And how has UBS adjusted its strategies to adapt?
Jennifer Povlitz (01:37):
Thank you, Victoria, and good morning and good afternoon to all my colleagues in the industry. It's a privilege and a pleasure to be here and have this conversation together. Leadership can be lonely, so it's nice to get ideas from each other.
Great question, Victoria. To start with, some of the trends we're seeing in recruiting and in the industry, the first I would say is based on three banks failing this year, is definitely a flight to safety and stability. More important than ever is reassuring clients that their wealth is safe in light of these failures, and it's reasonable for clients to ask an advisor if they were making a transition or during that transition: is wealth management, this new firm's primary or core business at scale? Which translates to them asking, is there expertise and stability? So that would be first, I would say, flight to safety and stability.
(02:30)
Secondly, and this is a little bit post-Covid, but enduring is, does the firm have a culture and shared values that I, the advisor, align with and agree with? It's the life is short, or the expression, we become like the five people we spend the most amount of time with, who are around us. And at UBS, we make accretive hires that build and improve upon our culture. Advisors want to be around others just like human beings, we all do, that lift us up. And part of that shared value is, client is at the center of everything, utmost importance. So hiring advisors that share those values and want to be part of that culture.
Third, and this is really important I think in a fragmented and segmented world in our industry, is alignment. What I mean by that is business model fit. Does my client base as an advisor match the firm's primary clients? So I always say, you don't want your clients to be the smallest clients of the firm, because then they risk or your business risks being irrelevant or resources going elsewhere. And you certainly don't want your clients to be the largest clients of the firm. The risk is insufficient capabilities. It's, the analogy I give is, I don't want to be wheeled into the ER room and there's an ear, nose and throat surgeon saying, well, I've never operated on a liver, but we'll try this one.
(03:51)
So quality over quantity is our strategy at UBS. It's to continue attracting the industry's most productive advisors. So for us, rather than targeting a specific headcount, we instead focus on selectively recruiting high producing advisors who want to grow and have the alignment that I talked about with high net worth and ultrahigh net worth clients as their strategy, as you mentioned Victoria in the open.
And we've also seen through our results that overall advisor headcount does not correlate with overall profitability of the firm or of the business unit. So alignment, business model fit.
(04:28)
And then finally, but this is a big multifaceted trend, is teaming. Clients as well as advisors are increasingly becoming more interested in teams. And our research shows teams do more business and grow faster than sole practitioners. We know teaming allows advisors to be more productive. The data reflects that. It offers their clients greater diversity of thought, subject matter expertise, and provide highly responsive service. And especially in the high net worth and ultrahigh net worth client space, teams solve complex issues for clients. It allows for the development of specialties, meaning more opportunities to add value to clients, which is really why we're here when we think about it.
(05:07)
And sometimes recruiting, since this is the topic of the day, involves succession planning for the next generation of the advisor business or finding a specific expertise that matches the niche of the client base need. For example, we had one recruit where we were hiring and needing more expertise for business owners pre- and post- liquidity event. So hiring a certified exit planning or CEPA designated advisor into a team to focus on the business owner segment is an example of that. And then teams are also getting larger. So we see, at UBS, double the number of cross-geography teams versus just in 2019, and that means across multiple stretched-out cities or states. So that's an interesting trend. And at UBS, 70% of our financial advisors are in teams. And by the way, that's up from just 57% in 2020. So in only two years, from 57 to 70%. And these advisors on teams are on average at UBS, 42% more productive and have 50% more in assets under management.
(06:18)
So the numbers bear out that teaming is a big part of how we best serve our clients in keeping, improving our industry leading productivity.
But anyway, to wrap up the question, Victoria. Advisor recruiting space is competitive. We know, as you said, advisors have lots of choices in the type of firm ranging from wirehouse to independent, and they also have choice in terms of recruit deals. So I would say the final trend we see, or at least that we're jumping on, is customizing the deal structure, the retirement transition, the succession transition, the customizing as well, the length of the deal, because we know everybody's situation is different.
(06:59)
So that's why we customize for each team member, not just the one financial advisor. So in a culture standpoint, we have a strong advisor-centric culture and capabilities that drive that business growth with lots of experts to support our advisors.
So in summary, the trends: I would say importance of safety and stability, the importance of shared culture and values, the business model fit, eagles or growers want to flock together and larger teams with geographic and work-life flexibility.
Victoria Zhuang (07:32):
That was a great overview, Jennifer. I think just to comment briefly on your point about teams spreading out coast to coast, I do think that probably maps onto what we saw during the pandemic and we could say post pandemic years trend of people, especially the wealthy professionals being able to work remotely and people relocating away from certain cities where perhaps cost of living, or other things were less desirable during that time. And of course wealth managers would be following that.
So to drill into what you mentioned about really appealing to advisors based on what they're looking for, their biggest pain points, and given your special interests as a firm in the ultra high net worth of client base. What do you think ultra high net worth advisors are most looking for when it comes to recruiting, and what does it look like for you guys to customize some of those transition offers for them?
Jennifer Povlitz (08:36):
Yeah, great question. So I'll start with the answer that applies to every segment. I would say when an advisor's making a move, they need to be able to look their clients in the eye or on the phone or in any other medium and say, this is better for you.
So number one is, the advisor believes the firm provides something better for their clients. Because think about it, people buy what we believe. So they really have to believe that, just like clients want to preserve their wealth and create a legacy for their assets to do something with the money, advisors are no different. They want to preserve what they built and find a firm and a platform that will support their priorities and growth, which may include a team, a succession plan, a place to eventually transition clients, and trusting them to the next generation. So first and foremost, it needs to be better for clients.
(09:29)
Now in the ultrahigh net worth space, we see the question always come up: is wealth management, the primary business of the firm? Not second or third or one of 15 lines of business. And the silly example I sometimes give as a kid, my father would say, we're going to a steak place. So order the steak. So if you want wealth management to be the primary business for your clients that are ultrahigh net worth, go to a firm that prioritizes that, is the core and primary business.
(09:59)
Third, I would say then for the complexity of the clients, of course we need a strength and breadth of the firm's platform. The capabilities and solutions have to be deep and broad enough for the clients that they're trying to serve. So part of that includes customizing solutions for clients. It can't be on the mill, where everything is one size fits all. Advisors need the ability to customize and tailor solutions, bespoke offerings for ultrahigh net worth clients.
And then who they bring into client meetings is really important. We can do this in the recruit process, so they get obviously a glimpse of that in advance, but the intellectual capital of the people who can help their clients. For instance, at UBS, it includes the chief investment office. For example, in recruit private briefings, we often pull a real estate analyst or the technology industry expert, and these folks work in wealth management and for wealth management clients, not for another arm of business. Estate planning lawyers, tax formation experts and tax overall credibility, and then philanthropy experts as well.
(11:11)
So we have a family office solutions group that has a team of specialists that advisors can use that works directly with ultra high net worth families and family offices. So let me give you an example. It would include a specialist dedicated to advising families on their art collections. That's pretty unique. Another one who focuses solely on design and governance of family offices. Like, what kind of roles do you hire for? What should you outsource, what should you insource? And when I mentioned tax earlier, I meant asset location. What assets do we locate, under which companies and which entities?
So we also have a global family and institutional wealth group. That's a mouthful. It's dedicated to clients who are essentially billionaires. And if you think about family businesses who are individuals that their business, their family needs investment banking regularly, that's also really unique. Trading, risk management, financing, for entrepreneurs and corporate entities.
(12:14)
So those are a couple examples, but high net worth and ultra high net worth focused advisors want to be at a firm they're not going to outgrow. Both in terms of client complexity and essentially the wealth level that they're going after. Because we see people start maybe focusing on $5 million, $10 million clients and then get really good at that and get referrals and want to move up-market. So you want to be at a firm where you won't outgrow.
Then last two things. The peer network is really important. To be able to have a boutique group of other advisors around you that are also trafficking in this space every day, and where you can get ideas from them and learn and grow with. We call that pattern recognition. If you've seen something over and over and over again, you immediately know. I say this to ultrahigh net worth clients. It's very private for you, it's very unique for you.
But we've seen these situations all around the globe and there's power in that pattern recognition. So finally, culture, I mentioned that earlier, Victoria to your earlier question, but partnership with the firm where everyone jumps when we say the word client, and that's really important.
(13:25)
So in summary, an uptick for ultrahigh net worth clients means a firm whose main business is wealth management, the core focus that they won't outgrow, a robust platform, customizing solutions for clients, a dedicated team of experts with intellectual capital that's unique, and a boutique community of top advisor peers to learn from and grow with, that has a cultural fit. So that's what we're seeing in the ultrahigh net worth space, Victoria.
Victoria Zhuang (13:52):
Yeah well that leads really well to my next question, which is perhaps a variation of this one. I think that you've mentioned how with this suite of specialists in a lot of different areas, that can be quite attractive to many advisors who may be interested in different kinds of areas. And you mentioned that FAs have more affiliation options than ever before. We've definitely seen at FP, how it often pays for firms to also tailor a pitch to the individual FA's needs. So when it comes to that, how do you think firms of all sizes can personalize the recruiting experience for an advisor?
Jennifer Povlitz (14:33):
Oh, that's so important. You hit on it, Victoria, personalizing. It's very personal. You know, think about it, an advisor's book of clients is their life's work in many cases. Those relationships and the journey that they've helped people on in their life.
So moving to a new firm. Yeah, it's a difficult decision. It's an emotional experience, it can elicit fear, and it definitely goes to identity. When people say, you meet on a plane: who are you or what do you do? It sort of becomes your identity at the deepest level. So yes, it's important to have a trusting relationship with a hiring manager and also with senior leaders, to know how they make decisions. But I would say personalizing also includes the most important people in the advisor's life. So a partner or spouse and the advisor's team members.
(15:22)
So I'll give you two examples, maybe would help, one of each. One of our field leaders, after six months of ongoing discussions, private briefings, understanding the capabilities, obviously understanding the advisor's book of business.
The night before they were going to join UBS, the local leader had that sixth sense that the advisor was a ball of nerves, which most people are the night before, but it seemed a little bit heightened.
So he went over to the advisor's home and spent four hours that evening reassuring, listening. Not just the advisor but her whole family and just feeling like, you're with me. You're with me in the tough times, you're with me in the scary times, you're with me and you got my back. Made a difference.
(16:08)
Second example of personalizing talks about the team and the team is so important to that client transition. Of course we have a little expression, happy TA, happy FA. TA is a team associate or support staff, FA, financial advisor.
So advisors like all of us, we're concerned about retaining talent on our teams. The fact that UBS is flexible on work arrangements and cares about balancing the personal and professional means that a recruited advisor who wants flexibility for their team, associates can choose to support that arrangement. And why not? We talked about trends earlier. You mentioned this, Victoria. We've seen a 30% increase in teams where the advisor's home state is different than their work state, and this even includes New York, New Jersey, Connecticut.
So knowing that we have cross-geography teams that are growing, that trend plays into the advantage of work flexibility recruiting. So we're able to accommodate team associates wanting to work two days a week or have a hybrid work arrangement. So that was another example of personalizing.
(17:15)
And then of course, just like advisors understand first a prospect's needs and goals to get them to be a client, finding out what's most important to them. So we engage those experts we talked about earlier for recruits via private briefing.
Another example of a recruit personalizing. We had one who focused, their whole team focused on athletes and entertainers. We have a client segment that does just that. So another advisor wanted a custom social media plan. It was part of their client acquisition plan. So we helped create that as a personalized part of the recruiting process.
So connecting them with resources that can provide something unique to support the specific needs of their clients. And then, of course the feeling like you're not in it alone. Someone has walked this path before me. We connect them with other UBS advisors who either have a similar client base before they make the move, or they've already made the move, maybe from a similar firm and they can provide firsthand experiences and peer-to-peer advice in that positive culture I talked about.
(18:18)
So, I mean one of the questions I always ask is kind of the wave the magic wand, or phone home from the future question. If it's two years from now and we're sitting down, having lunch or a cup of coffee and you say, I'm happier than I've ever been, my team is, my clients are, my business is. What does that dream future look like and what are the gaps to get there?
And so then the recruit can articulate the path and those important elements that they want to get there. So it's really about helping. It's, what is the first rule in the medical field? The Hippocratic oath, do no harm. So preserve their business, just like clients preserve their wealth, and then create the legacy my clients want. That could be a team, a succession plan, growth for them. So that's some of it. But I would say, just in sort of closing on this one, the recruit experience is really important and we decided a while ago, let's just be really simple and transparent and share topics that recruits have told us is important on our website.
(19:24)
So any of you can go to ubs.com/advisorrecruiting. ubs.com/advisorrecruiting. Maybe you'll get some ideas, but it's what recruits have told us is important and allows them to kick the tires. So the good news Victoria, is we are in, those of us grown up in wealth management. We are in the trust and relationship business. So creating that for clients and for advisor teams, serving alongside them, is a noble business and something that we hopefully are already good at in this process.
Victoria Zhuang (19:55):
Yeah, well thanks for sharing all those great examples. Definitely the story about someone who would comfort someone for four hours the night before they start on a new job is something that I think our listeners can take away no matter what firm they work at, the importance of nurturing that relationship and providing reassurance throughout the process of recruiting.
So for my next question, on a related note about reassurance, we know that UBS has acquired Credit Suisse and broadly speaking, we know there's been a lot of mergers and acquisitions going on in the industry. And advisors do frequently cite a recent deal as reason to jump ship from their current firm, or it might be something that gives prospective advisors pause. So how do you think firms of any size can address potential concerns about a deal when recruiting?
Jennifer Povlitz (20:48):
Yeah, so lots and lots of firms in the different business models go through acquisitions, mergers, obviously changes. So leadership is a lot about communicating through change, for sure. So with any large scale change, it's important to be communicating a message of stability. I also think that it's important to communicate and think about how, actually, how we're communicating to clients and advisors as well. And be deliberate.
And what I think about is three forms of communication. And I sort of landed on this when Covid hit. I thought, how are we going to possibly communicate effectively to so many clients and so many advisors?
(21:28)
So this is the way I simply think about the three buckets: One to many, that's maybe a little bit what we're doing now. You can get lots and lots of people and it tends to be a one-way message. So one to many, one-to-one, most effective for change. And then small group dialogue, where you lean on other people. And so each of these three methods have strengths and impact.
It's important to assure clients, advisors, and recruits. I would say the two things to anchor the content of what we say is: what has not changed and what will change.
There's obviously a lot in the middle that's uncertain, but providing clear, consistent updates. Our CEO, Sergio Ermotti, has done that in integration updates very regularly. And not just emails, but videos and an intra-site as well.
(22:21)
And then what I did is reaching out to the largest clients one-on-one during periods of change. Obviously having a prep call with the advisor team first, respecting it's that relationship, and then being additive too, on a senior level. So all of us can do that as leaders, assuring them what hasn't changed, what will, how it will be additive besides just a high touch personalized experience.
But I'll give you an example. One field leader in our division did with recruits as it relates to this, which I think is excellent. She calls recruits like everyone does, and keeps in touch and has a tickler to when to call back.
But she also, in the sort of one to many, she sends out a letter. It looks personal, but it's a letter she sends to many. It's a quarterly letter to her recruits. And the most recent one she just sent said much has happened since March. Well, March was when the acquisition was announced, but before it was closed. And she shared that the close will reinforce our position as the largest global wealth manager with $5 trillion in client assets. She also emphasized what has not changed, which is her own local servant leadership culture in her market and the advantages of the highest advisor productivity within her eight offices, both of which support recruits' growth. So that's an example of, she used these communication principles with recruits.
(23:48)
And then back to your question on UBS and Credit Suisse. We think it's going to be incredibly additive and make the enhanced offering even stronger with the $5 trillion in assets globally, with so many people on the ground and other countries being able to talk to and see to our clients, even in the U.S., what's going on.
It also gives us the leading Swiss universal bank and then a leading capital-light investment bank in the field and industry groups of expertise. But our biggest opportunity is probably similar to all the viewers today, and our biggest growth priority at UBS remains expanding wealth management, especially in the U.S. and then also in Asia.
(24:30)
The U.S. is the largest market for wealth management, so we continue to be focused here. The number of U.S. millionaires, I'll just give you a stat trend. In 2000, there were 7,600 millionaires in the United States. In December, 2022, it was 22,700. And then in 2027, call it four and a half years from now, expects to be almost 27,000. So five-year increase of 16% prospectively. So that's a pretty big addressable opportunity.
It's nice to know that we're in a business where we probably don't have all of us enough financial advisors to give advice to this number of millionaires. So Credit Suisse brought us the new capabilities. We are stronger in Latin America. We'll have earnings in about a week, so more to come on that, but together we'll be more competitive and even better position to deliver on our Americas strategy, Victoria.
Victoria Zhuang (25:32):
Well great. Thank you and we'll definitely look forward to your earnings. And it's a great point you touch upon that there's going to be a lot of growth in the market. So for firms that do manage to be developing and attracting and retaining advisor talent, it looks like a great time for the industry. And so on that note, it looks like we are at time.
And as a quick plug here, FP will be coming out next week with a feature story focused on what industry firms should consider when recruiting. And you can read that in our print magazine or online, and definitely follow us at financial-planning.com for all of our wealth management news.
For Financial Planning, I'm Victoria Zhuang. Thanks again, Jennifer, for joining us. It's been great having you, and I hope you all have a great day.
Jennifer Povlitz (26:16):
Thanks so much. Appreciate the time.
