The Bank of New York’s Pershing Advisor Solutions LLC Unit Releases New Study Focusing on Best Practices
JERSEY CITY, N.J., November 13, 2006 -- The Pershing Advisor Solutions LLC unit of The Bank of New York Company, Inc. and HNW, Inc. introduced a new study today entitled A View From the Top: Best Practices in Leveraging Human Capital. The report is among the first quantitative studies devoted to helping independent registered investment advisors make their businesses more successful by identifying and examining best practices for attracting, hiring, and retaining employees.
The study also provides suggestions for how independent registered investment advisors can identify potential areas of organizational weakness and offers recommendations for maximizing effectiveness within their own firms by learning from the experiences and best practices of others.
Among its key findings, the study reveals that high revenue firms (those with gross annual revenues in excess of $1 million) consistently devote more time and resources than their low revenue counterparts in such human capital areas as:
- Employee training and orientation (69% vs. 55%)
- Periodic performance reviews (78% vs. 57%)
- Establishing formal manager/reporting structures (48% vs. 25%)
Client Segmentation Present, But Varied Among Top Firms
Among high revenue firms, more than half (55%) create client segmentation strategies compared with just 40% for low revenue firms. The study reveals that high revenue firms are also more likely to separate the sales and relationship management functions (78% vs. 55%) and to deploy junior teams to smaller and less profitable relationships (26% vs. 12%) than low revenue firms, thereby creating a career path as well as ensuring that talent levels align with client value.
In addition, high revenue firms, especially wealth management practices, do not just rely on traditional means of client segmentation such as assets under management, but are more likely to segment by less traditional methods. In fact, wealth managers are more than twice as likely as investment managers (29% vs. 13%) to segment by relationship revenue, and more than three times as likely to segment by relationship profitability (21% vs. 6%).
High Revenue Firms Place Greater Emphasis on Attracting and Retaining Quality Professionals
High revenue firms place greater emphasis than low revenue firms on attracting and retaining employees, and view a range of recruiting tools as effective, including:
- Salary (64% vs. 51%)
- Profit sharing (60% vs. 46%)
- Benefits package (60% vs. 32%)
- Equity (55% vs. 37%)
- Signing Bonus (16% vs. 5%)
When it comes to recruiting qualified candidates, while competitive compensation is clearly viewed as important, certain intangibles such as “firm reputation” and “corporate culture” were viewed as the most effective recruiting tools by nearly 70% of all survey respondents.
Comparisons of firms in the same lifestage category were also particularly meaningful in identifying best practices for effectively managing human capital. For example, the report defines the “experienced” lifestage category as firms primarily focused on broadening and deepening existing relationships, contemplating large-scale growth via merger or acquisition and looking to systematize processes.
Among the experienced firms, 42% of high revenue firms would characterize their overall compensation package as "generous" or "very generous" versus just 32% of experienced low revenue firms. In addition, 45% of experienced high revenue firms would characterize their benefits package as "generous" or "very generous" versus just 24% of experienced low revenue firms.
High revenue firms are also generally more likely to terminate a poor-performing employee than low revenue firms (62% vs. 40%), and the employee termination process appears to be more systematized. Furthermore, 64% of experienced high revenue firms indicate that they have terminated a poorly performing employee at some point, compared to 45% of experienced low revenue firms. High revenue firms are also more likely to mentor (43% vs. 31%) and redefine roles and responsibilities (34% vs. 26%).
John Iachello, managing director at Pershing Advisor Solutions, said, “As firms compete to address the growing demands and sophisticated needs of the high-net-worth marketplace, attracting, hiring and retaining top-tier talent is becoming increasingly important. To be successful in today’s competitive business environment, advisory firms need to operate at maximum efficiency, gain organizational leverage wherever possible and maximize the value of their associates.”
Stacey Haefele, president of HNW, Inc., said, “Without some insight into what their peers are doing successfully, most advisors are forced to go it alone on organizational management issues, designing their own systems and processes by trial and error and hoping to discover what works. Pershing is the first firm we know of that’s lifting this topic from the qualitative to the quantitative realm in an effort to assist advisors.”
Regardless of Lifestage, Best Practices in Human Capital Are Essential
Based on the study, advisory firms -- whether they are small or large, new or established -- can benefit from investing time and resources in improved management of human capital. While each firm may have unique challenges, some general recommendations from the study deserve consideration. Specifically, the study suggests that firms should consider:
- Placing as much emphasis on building a corporate culture of excellence as on growing the business. Firm reputation and corporate culture may be the strongest recruiting cards.
- Providing employees with a defined career path, formal reporting structure, and periodic performance reviews
- Segmenting clients to ensure that talent levels align with client value
The study was commissioned by Pershing Advisor Solutions and independently executed by HNW, Inc. Respondents were principals of fee-based or fee-only practices with a minimum of $50 million in assets under management and at least 50% of their client base was comprised of individuals versus institutions. For a copy of the report, please email either Barbara Gallo a bgallo@pershing.com or Michael Geller at mgeller@pershing.com.
Pershing Advisor Solutions LLC is an affiliate of Pershing LLC and a leading provider of financial services outsourcing solutions to independent, fee-based registered investment advisors and dually-registered advisors working in conjunction with many of Pershing LLC’s introducing broker-dealer customers. Pershing LLC, a subsidiary of The Bank of New York Company, Inc., has a 65-year heritage of providing custodial services and outsourcing solutions to many of the world’s leading financial services organizations. Through an innovative custody platform, Pershing Advisor Solutions delivers superior expertise and scalable and customizable solutions to help manage and grow fee-based businesses. Additional information is available at www.pershingadvisorsolutions.com.
HNW, Inc. was founded in 1999 with a single guiding purpose: to provide leading companies with sophisticated and focused marketing solutions aimed at acquiring and retaining high-net-worth clients. Through its Services, Software, and Research divisions, HNW works with more than half of the 30 largest U.S. financial services institutions and their advisors, helping them more efficiently and effectively understand, attract, and retain high-net-worth individuals and families. HNW is headquartered in New York, with offices in Boston and San Francisco. For more information about HNW, please visit www.hnw.com
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in providing a comprehensive array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. The Company has a long tradition of collaborating with clients to deliver innovative solutions through its core competencies: securities servicing, treasury management, asset management, and private banking. The Company’s extensive global client base includes a broad range of leading financial institutions, corporations, government entities, endowments and foundations. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide. Additional information is available at www.bankofny.com.
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