Although entry level “rookie” programs provide an invaluable foot in the door for new financial advisors striving to break into the investment industry, the availability and size of these programs have been reduced sharply across Canada in recent years, leaving many hopeful advisors out in the cold.
But rookie programs still exist, and some firms are redefining them, making them more exclusive and focused on the skills advisors will need to survive and thrive in the future.
For Bruce Ferman, senior vice-president and managing director of the private client division at Toronto-based BMO Nesbitt Burns Inc., the drop in the number of rookie programs across Canada’s investment industry is due, in part, to the increasing trend of consolidation among financial services firms.
“Over the past 10 years, the number of developing advisor programs has diminished ... [as a result of] consolidation in the business,” says Mr. Ferman. “There are fewer organizations prepared to make the investment [in new talent], and as different organizations set about their strategies, they’re making different choices about how they wish to develop people and build careers. [In turn,] there are fewer opportunities than there once were.”
And with the growing shift toward technology – such as the emergence of robo-advisors and online sources of financial advice – firms have had to get creative about how they remain attractive to clients. Putting resources into staying competitive and embracing technology can mean diverting those resources away from training programs for new talent, which can be costly and are not always successful, says Andrea Linger, manager, practice management and head of the network for women advisors at Raymond James Ltd. in Victoria.
“The failure rate [for the typical 18-month advisor training program] is really high,” says Ms. Linger, who heads Raymond James’ new advisor development program. “In some places it’s up to 80 per cent. And when we say failure rate, there’s only one in five [advisors] who are still in the business after five years. So, [if] you think of it from a firm’s perspective, that’s a huge investment that’s, basically, just throwing money away.”
However, Canada’s financial advisor population is aging rapidly, Ms. Linger says. And as a large portion of experienced advisors inch closer to retirement, it’s becoming all the more essential that firms prepare for a shortage by training new talent to fill these gaps.
“The average age of an advisor is about 57,” she says. “The aging demographics of our advisors make it imperative that we have some young advisors in the pipeline, ready, able and qualified to take over businesses, and be able to provide that exceptional service that clients have been previously receiving.”
As such, Raymond James has responded to this changing industry environment by restructuring rather than downsizing its advisor development program in early 2018. The aim is to train young talent more meaningfully and achieve higher success rates once these emerging advisors graduate from the program.
Specifically, Raymond James extended the length of its rookie program to seven years from 18 months. During the first three of those years, which include online and in-person courses, new advisors work with a mentor to begin to build their books of business. For the following four years, the firm coaches advisors to ensure success as they further establish their careers with the firms.
Since restructuring the program, Raymond James has increased its capacity by approximately 45 per cent, Ms. Linger estimates. Although the old development program served 10 to 13 advisors a year, the new one serves 20, broken into two classes of around 10 each.
Craig Meeds, head of Toronto-based TD Wealth Private Investment Advice, says the firm’s new investment advisor program underwent similar changes in 2017, when it was redesigned “to attract and develop a more diverse talent pool to be more adaptable to our clients’ needs.”
Namely, the firm expanded the length of the program to three years from six months. In addition, TD Wealth began providing “more support and compensation certainty” for participating advisors.
“Our goal has, and always will be, to find, hire and develop advisors that will be able to deliver the best-in-class client experience that TD Wealth prides itself on,” Mr. Meeds says. “What has changed is the complexity of that goal, both for our clients and for our industry. Practically speaking, that means we have longer training periods and need to support our new advisors financially for a longer period of time.”
And throughout these changes, TD Wealth has kept the capacity of the program – approximately 20 new advisors – constant. Instead, the firm has devoted more time and resources into recruiting a pool of participants that’s representative of Canada’s demographic diversity, putting a special focus on attracting women to the program.
TD Wealth also altered the content of their advisor development program to focus on client relations, communication and other soft skills.
“We prioritized finding talented people with practical experience in managing and maintaining successful client relationships,” Mr. Meeds says. “We know that having a direct, hands-on connection to clients is critical to an advisor’s success.”
BMO Nesbitt Burns also took the same approach in 2017, Mr. Ferman says. Whereas the 25-year-old program was once mostly course-based, focused on teaching advisors technical skills such as portfolio construction and management, it now takes a more holistic approach, training advisors in “understanding clients” and “relationship management.”
And while changes in the industry may push firms toward scaling back training opportunities for new advisors, Mr. Ferman says that BMO Nesbitt Burns’ devotion to training new advisors has been key to the firm’s success, as a whole.
“We’ve always been believers in developing talent and always invested in adapting the program to meet the needs of today so it continues to be relevant,” Mr. Ferman says. “[Although] that’s been a challenge, that’s why we’ve seen more success than other [firms] and that’s why we continue to invest in the program and continue to attract talented individuals.”