A bad hire can really hurt an investment organization. Avoid the common hiring mistakes mention below and get the most out of new joiners.
Indeed, the wrong hire can be costly:
The US Department of Labor estimates that the average cost of a bad hiring decision is at least 30% of the employee's first-year expected earnings.
Other studies show a bad hire can cost as much as $240,000, accounting for employee benefits and perks, the time and resources invested in recruiting and training new employees, the lack of productivity, less effective collaboration with colleagues, and lesser quality client servicing.
In turn, these instances lead to decreased morale, increased stress, higher turnover, and greater pressure on RIA bottom lines.
With that in mind, investment advisory firms need to get hiring done right.
Conducting unstructured interviews without a clear set of questions and evaluation criteria can lead to inconsistent assessments of candidates.
Establishing a structured interview process helps ensure a fair and comprehensive evaluation of all applicants.
Additionally, rushing through the candidate screening process can result in hiring individuals who may not be a good fit for the advisory firm.
Failing to review resumes thoroughly, contacting references, or performing background checks can lead to hiring unsuitable candidates.
Rigidly adhering to outdated hiring practices without adapting to changing market dynamics and candidate expectations can hinder the ability to attract top talent.
For example, if you demand staff to be working in the office without any flexibility, applicants will lose interest.
Additionally, if you do not accept remote hires, you might lose access to greater talent outside your geographical area.
RIAs should stay informed about evolving hiring trends and implement strategies to remain competitive in the job market.
Check out one of earlier posts on the financial services industry hiring trends for 2023.
Management might have a vision to build the client base by improving sales and marketing efforts.
Or they want to improve the client experience by hiring more client servicing staff.
Or they want to run a more robust and effective operation by hiring more investment operations staff.
The problem is management has not carefully thought through just how much work is actually required.
After all, the job tasks might not be enough to fill an 8-hour workday everyday. The result is the hire doesn't have enough work to do, and they sit their idle.
This puts stress on management as they struggle to find ways to keep the new hire productive.
Before hiring, RIAs should know for certain that there will be more than enough full-time work available.
In short, don't put the cart before the horse!
Sure, new hires might perform tasks that weren't part of the job description, but if the workloads are out of line with expectations and occupy a large chunk of their working day, then the new hire will be dissatisfied with the job.
According to the 2022 Job Seeker Nation Report, nearly 1 in 3 new hires will quit their job in the first 90 days. The main reason for quitting is because the day-to-day role was not as expected.
Failing to communicate job expectations, performance standards, and goals during the hiring process can lead to misunderstandings and underperformance. Clearly defining expectations from the outset helps set the stage for success.
If you rigidly expect every candidate to have X degree(s), Y years of experience, and Z types/numbers of accomplishments, you will greatly shrink your talent pool of applicants.
Additionally, if your offered compensation falls below the industry average, there will be even fewer qualified candidates.
It's one thing to have standards, but know when to compromise.
Offer a compensation package that is competitive, and know when to look at traits beyond the degrees, certifications, years of experience, and previous accomplishments (see below).
While technical skills and qualifications are important, undervaluing soft skills is one of the most common hiring mistakes.
Sure, for compliance purposes, some positions require a Series 7 or CFP license.
But when you have a chance to consider the intangibles, do so:
The last thing RIAs need is a candidate who looks great on paper, but once hired, their "know-it-all" attitude creates problems in the workplace. Colleagues will harbor resentment for said new hire, leading to poor working relationships and ultimately counter-productive results.
Character counts when hiring.
Neglecting to consider the cultural fit of a candidate can lead to potential conflicts and challenges down the line.
All in all, it's important to assess whether candidates align with the firm's values, work style, and team dynamics to ensure a harmonious fit.
For some tasks, it makes no financial sense to hire in house when a third party investment management outsourcing services provider can do the job more effectively, and at a lower cost.
Furthermore, the tasks required might not even be full-time jobs.
In any case, a new hire's time and company resources could be used more effectively by offloading work to an outsourced investment services provider like Empaxis.
Whether it's a full-time or part-time work, the outsourced model is flexible to handle it all, and Empaxis can take care of the daily reconciliation and performance, among other middle- and back-office responsibilities.
Indeed, RIAs have a lot to gain with outsourcing and also a lot to lose by not outsourcing.
As mentioned above, there is a lot to lose by getting a wrong hire.
The good thing is these common hiring mistakes can be avoided with proper planning and reflection previous hiring experiences.
RIAs should pay closer to attention to hiring processes, make sure the work responsibilities line up with expectations and make sure there is enough work to begin with. In addition, they should pay attention to soft skills, company culture, and know when to hire a third party.
By heeding these suggestions, RIAs will improve their hiring and increase the likelihood of finding the right candidates for their firm.