Paul Clever stands before a classroom of 89 new financial advisors who braved 14-degree temperatures, snow and flight delays to get to St. Louis. The students, who came from as far away as Salt Lake City and Pensacola, Florida, listen closely to Clever's lecture on fixed income. "Clients must be aware that if they sell a bond before maturity, they could lose money," he says.
As head of the fixed income trading desk at Wells Fargo, Clever was doing his part during a week of training new recruits (who have all passed their Series 7) for the firm. It is Wednesday, December 15th , and he tells the rookies to remind clients: "Prices will fluctuate but if they hold them to maturity, they'll get their par back."
Such advice can't come too soon. For most of these new advisors, their first day of production begins Feb. 7, 2011, says Charlie Schwartz, Wells Fargo's supervisor of program management. "The actual training is 19 weeks but there is also an extensive interview process. Anyone who becomes an FA must come through our program."
At a time when the population of the financial advisory industry is both aging and the training of new recruits has diminished, Wells Fargo is one of the firms that has continued to put preparation first. The average age of an advisor is approximately 50 years old, and 14% of advisors are over 60, according to a report published last year by Cerulli Associates in Boston. Much of the industry has dealt with the dilemma in recent years by recruiting advisors already in the business, rather than increasing internal training of new recruits. But this all-out war for talent between firms doesn't address the looming problem of baby boomer-aged advisors retiring with few newcomers to take their place.
What Firms Are Doing
Merrill Lynch used to be noted for decades of devoted training. While the financial crisis caused it and other firms to cut back on training, last year Merrill (now part of Bank of America) reportedly began ramping up its program.
Morgan Stanley Smith Barney, for its part, expects to hire trainees at a level consistent with 2010, which means approximately 2,000 individuals. Spokeswoman Christine Pollak says that Morgan Stanley's "focus will continue to be placing trainees on teams and identifying mid-career prospects who bring some business experience and a professional network to the role."
A couple of years ago, St. Louis-based Edward Jones opened a new facility to train recruits with little experience as well as mid-career changers. It currently has a one-week, interactive session, followed by five weeks in the field and another two weeks focusing on prospecting.
Meanwhile, Wells Fargo's training program, which it inherited when it acquired Wachovia Corp., which, in turn, had taken over A.G. Edwards & Sons, has been steadily at it for 42 years.
The firm's approach has garnered consistent praise from Training magazine through the years-from 2001 when it was A.G. Edwards-through 2008 when it was part of Wachovia. In November, Wells Fargo placed 27th in the magazine's annual ranking of top corporate training departments.
"Both legacy firms put a high priority on training," notes Peter Miller, president of the Advisor Development Group at Wells Fargo Advisors. "It was driven early out of necessity. A.G. Edwards did not recruit with front money." So, the answer was to invest developing talent. "Danny Ludeman recognized early on that this was a special piece of A.G. Edwards," Miller says, referring to the current chief executive officer of Wells Fargo Advisors, who headed up Wachovia's brokerage force before it acquired A.G. Edwards.
Miller acknowledges that it's no secret that the advisory workforce throughout the industry is aging. "At the very least we need to bring in new FAs to counter-balance that," he says. Wells Fargo has the capability to train 100 advisors a month, including advisors from the firm's clearing clients, Miller says. The training program is also concentrating on bringing more women and minorities into the advisor workforce at the firm. "Fifty percent of our training class next year will have a diverse element," Miller says.
Wells Fargo requires its rookies to take three training trips a year to the home office in St. Louis. On average, trainees have $12 million in assets under management after two years, according to spokeswoman Rachelle Rowe.
Last year, the firm trained 80 to 90 recruits per month and that pace is expected to continue this year. In fact, the firm added just under 800 trainees in 2010. "We've been continuously running programs each month in both up and down markets," says Mike Zuccarello, managing director for training and development at Wells Fargo Advisors. "Our core training runs two and a half years." The trainee to coach ratio is 10-to-1, Zuccarello adds. And many of the rookies who come from another profession bring sales experience. And some 60 of the recent recruits hail from training programs at competitors such as Morgan Stanley Smith Barney and Merrill Lynch, he adds.
New advisors at Wells must pass product suitability exams, present a plan based on the firm's internal Envision software, get a chartered retirement planning counselor designation and double the size of their network by the end of the 19-week program. With all that in mind, the firm not only devotes considerable time and effort to helping trainees meet those goals, it also devotes quite a lot of space to advisor preparation. Consider the size of the Wells Fargo "University." At 250,000 square feet and 41 classrooms, the mostly glass-walled facility is a testament to the firm's commitment to send out knowledgeable advisors.
"I've been here 10 years and it still blows me away," Charlie Schwartz says of both the space and the program.
However, the training is more than just a classroom lecture going over facts and risks about financial products. Much of the training focuses on "people skills"-how to talk to prospective and current clients. "We really talk to [trainees] a lot about building their relationships," says Heidi Puls, the firm's business foundations program lead and sales development consultant.
The Face of the New Advisor
For Ashley Rey of Short Hills, New Jersey, the route to financial advisor has been quick. Not long out of college with a degree in economics, she spent the last year in Madrid and completed internships with both an estate and tax planning law firm and Goldman Sachs private wealth management. With her Series 7 exam behind her, she practiced cold-calling in a breakout session.
"I'm joining my father's team," she says cheerily, a phone to her ear. She adds that she will specialize in asset allocation and trading. Her father is an A.G. Edwards legacy advisor and now Rey is becoming part of a family tradition. "I've always seen how happy he was," she says. "A lot of my network are his clients," she says. "People are already setting up appointments." But she is hoping to build her own, separate network from her college sport, lacrosse, which she now coaches in her community.
While Rey is just starting out, others like Danny Wexler of Newport Beach, California are forging a second career. A self-confident lawyer turning advisor, he already has a niche among very high-net-worth clients. "I'm a good networker and a rainmaker," he says. Wexler is joining a team of three advisors who have been together nearly 19 years. The team serviced the 401(k) plan of Wexler's former law firm. "I'm going to keep my [legal] license but I'm not practicing law."
Another career-changer is a former project manager at T-Mobile, Shawn Healy. "I've never made a cold call in my life," says the soft-spoken Healy. That Tuesday at training was his first time. "I got into the business because of one of my friends," says Healy of Rockaway, New Jersey. And, he also wanted a change from sitting in front of a computer. When he decided to make the switch, it was just as his new baby son was born six months ago. "I started out with the initial interview and the aptitude test and role-playing. Then I created a business plan. That was the hardest," he says.
The Hot Seat
"Who is our client today?" asks Charlie Schwartz of the 12 trainees split into two equal teams in a breakout session. The fictional client was a septuagenarian couple called "The Bunkers" who have been married for 50 years, have three adult children, six grandchildren and hold no interest in individual equities.
"They have a portfolio of $700,000 with a rival and a CD of $55,000," Schwartz says. "They have a net worth of $1 million and have owned bonds for years." The couple wants a decent yield and no more than 10 years to maturity. They make decisions together but their daughter is a CPA and gives them advice," he says.
The two teams had to choose the best of five bonds for the couple. They were preparing for being in "The Hot Seat" where someone from each team would have to defend their product selection. "Everyone is going to be presenting a premium bond. You've got three minutes, starting now," Schwartz tells them.
The rookies pore over the offerings before finally deciding on a JP Morgan Chase bond. It met most of the criteria, which included income as the investment objective, a time horizon of about 10 years, a 15% tax bracket and a risk tolerance deemed conservative.
A similar scene plays out in training leader Brian Lunceford's session. A trainee runs through the highlights of the bond, explaining how much it would cost and the risks. "I would go through the risks before the costs," Lunceford advises.
Back in the larger classroom, representatives from various teams took turns defending the bond they chose for the couple. Three training leaders, including Lunceford, took the role of the client couple and their daughter as the rookie advisor explained why a particular bond choice best suited the clients' needs.
Afterward, each person in the hot seat was given a critique. "Eye contact," stressed one team leader. "Include everyone involved."
"Keep it simple and sincere," advised another team leader. "Avoid the broker jargon."
Another Firm's Experiment
At Raymond James, Bob Patrick, director of private client group education and development, says the firm is expanding its old four-week program, which included a month of initial training with two weeks at the home office in St. Petersburg, Florida.
"Four weeks is not a lot of time," Patrick admits. "So, the idea was to elongate the program." For the past two and a half years, the firm has run a residency program that allows the recruits to focus on how they want their practice to be built as well as on their technical skills. Rookies already have their Series 7 so the focus is on practical skills, Patrick says. Of course, there is a classroom element that focuses on subjects such as portfolio construction, leveraging alternative investment and much more. There is "a large learning gap that has to be closed and you're asking them to build their business and continue a steep learning curve and learn all the products," he says.
The firm currently has two advisors-one in Tampa and the other in Clearwater, Florida-that have completed the program. Then, there are two sets of candidates-six who have gone through a full year and are now developing their networking skills. They'll be moving out to branches by May, Patrick says. Another four just started the process, he says. "So, it's been great because we've been able to watch and adjust the training process. Now, we're going to move it to the branches. We really want them in their home markets as they go through the learning process. They would be supporting other teams. They won't be rushed into having to build business immediately."
Practice Makes Perfect
At the end of the day of practice cold-calling, being on the hot seat and classroom instruction, the rookies attend a mock cocktail reception for "The Cornwall Symphony" in an atrium of the training center at Wells Fargo. It is a full-scale role playing event, where the students-taking on the roles of both advisors and prospective clients-put their acquired knowledge into practice.
"Hi, my name is Sokoni Scott. How are you doing?" begins one advisor-trainee, a glass of wine in his hand.
"Hi, I'm Corey. I'm an IT manager," says the prospect, Corey Wessel, of Raleigh, N.C., balancing some cheese and crackers.
"Are you in security or programming?" asks Scott, who hails from Charlotte, N.C.
"A little of both," replies Wessel, the prospect.
After a little chitchat about the symphony, Scott says that he is a financial advisor candidate who will have his license in a couple of months. He asks if Wessel is investing now.
Wessel responds that he isn't doing much beyond his 401(k) plan. Scott asks him if he has a financial plan for the next 15 to 20 years. "Not really," Wessel says, adding that he is thinking about it.
Scott says he wants to keep in touch. They exchange cards.
After the mock conversation, the two young men talk about how helpful the rehearsal is. "I've had four sales jobs," Wessel says. "I've never seen this before. I'm outgoing. But I didn't realize there's a whole process behind this."
Scott agrees, saying, "it's the ultimate way of putting it into practice."