Annual business planning is crucial for wealth management leaders and their teams. It’s the time to assess the current landscape, anticipate future trends, and formulate strategies to ensure your organization’s success. To help wealth management leaders get a jump start on their annual planning, Terrapin hosted the webinar Top Priorities for Wealth Management Leaders in 2024, featuring guest speaker Arthur Osman, Founder and Managing Director of Arthur Osman & Company. Arthur shared key perspectives on business optimization models, advisor development programs, and much more.

Here are the top takeaways.

Evaluating Financial Advisor Performance

There are numerous KPIs and data points employed in tracking advisor performance. In our first webinar poll, “What data do you look at for evaluating financial advisor performance?” 23% of respondents stated they look at “Production vs. Goal.” “Net New Assets vs. Goal” ranked second at 15%, followed by “YoY Production Increase” at 14%.

These results confirm what Arthur has seen in the bank and credit union channel, namely that there has been higher use of AUM growth and net new assets. “We’re seeing businesses begin to incorporate assets as a primary key performance indicator, almost as important as revenue.” Arthur continued, “I think that speaks a lot to how the business has evolved and the prominence of advisory business within the overall practice.”

Poll 1 Results

Advisor Management and Development

While there are many top priorities leaders are focusing on, Arthur believes that initiatives that center on advisor management and development are critical. These initiatives aim to develop and retain talent, facilitate career progression, and plan for succession, all of which are part of the career arc of an advisor. In the financial institution space, a primary focus involves creating non-branch-based advisor roles, often referred to as “second story” roles. Organizations are now investing in advisor development programs to reduce the cost and risk of hiring experienced advisors and to counter the declining population of financial advisors. They are also working on optimizing advisor practices and introducing second story programs to address the plateau in advisor growth. A leading goal is to retain advisors through their retirement. Business leaders ought to assess where their business fits in this career arc and whether they have the necessary support to develop talent and retain advisors throughout their careers. The topics presented by Arthur highlight the industry’s growing emphasis on talent development and progression.

Advisor Staffing Challenges

In our final poll, “What challenges are you facing in meeting your advisor staffing goals?” 35.6% of respondents felt that a “shrinking talent pool” was their biggest challenge.

Arthur noted that the talent pool is shrinking due to factors such as reduced advisor movement (churn rate) and the retirement of advisors. This shortage of available talent makes recruitment more challenging. However, all of this underscores the need for organizations to address the shrinking talent pool by investing in talent development and creating tailored programs to attract and develop less experienced individuals. According to Arthur, “if you can bring them in, develop them, and do it in a way that’s specific and unique to your organization, then, the long-term play, and the net effect is really positive.” 

Poll 2 Results

In the second part of this poll, we asked attendees, “Compared to last year, has your advisor count increased, decreased, or remained unchanged?” 42% of respondents stated that their advisor count had increased.

The speakers agreed that while this is good to witness, seeing this number reach 50% or higher would be even better. Arthur noted that industry reporting and benchmarking reinforce this poll. “This is one of the first times in a while that we’ve actually seen the majority of firms in the industry, and in the bank channel in particular, grow advisor headcount. But there is certainly an opportunity for improvement.”

Poll 2 Results

“This is one of the first times in a while that we’ve actually seen the majority of firms in the industry, and in the bank channel in particular, grow advisor headcount. But there is certainly an opportunity for improvement.”

– Arthur Osman

Business Optimization Framework

Arthur shared his business optimization model aimed at wealth management businesses within financial institutions. This framework is designed to serve various customer segments and handle a high volume of customers per advisor. It assists business leaders in making staffing and structural decisions for their organizations, moving beyond traditional criteria like deposit base figures and household numbers. Key components include:

  • Determining how many and what type of advisors an organization should have.
  • Deciding when and how to optimize an advisor’s territory or book of business, considering metrics like brokerage assets, advisory assets, and the range of services offered.
  • To ensure there is no glass ceiling on business growth, implement an advisor development program that guides advisors to “graduate” from their current roles in branches to more advanced “second story” roles.

Wrapping Up

In Arthur’s concluding comments, he drove home the importance of an advisor development program. He emphasized that it benefits not only the advisor but the institution and the client as well. From an institution standpoint, it covers strategic outcomes that include creating an unlimited growth potential for the wealth business within the institution, minimizing opportunity costs associated with branch penetration, and improving expertise to offer a continuum of services to all client segments. From a client perspective, you’re positioning their advisor to be a better service to them and deliver a superior experience to them. Consequently, this creates an opportunity for more referrals from their friends and family, a top priority for the advisors as they advance in their roles.

Want to learn more? Watch the full webinar recording on-demand and get valuable insights on business optimization models, advisor development programs, and much more.