The cultivation of talent’s come a long way. Baby.

At its center: succession planning, according to sigmaassessmentsystems.com.

SIGMA – with the intent of providing organizational leaders with a snapshot of what’s unfolding today in succession planning – produced a report on where things stood this year. Several emerging trends were revealed: 

Most organizations are focused on recruiting and retaining staff.

Many organizations recognize that they must keep up with industry innovation.

Many leaders are committed to improving customer experience.

A significant number or organizations want to transform their brand and culture

Interestingly, new financial advisors are setting a high rate of bolting from the industry, according to a Cerulli Associates report, reported financial-planning.com.

The importance of new talent in wealth management is further stoked given the fact financial advisors, who oversee trillions of dollars of assets, are riding into the sunset.

Yet, those making their maiden voyage into the profession aren’t exactly being received with a steaming mocha latte and scone, according to Cerulli, which reported that while 13,169 of new trainees left the industry in the rearview mirror, offsetting the more than 18,000 it picked up,

For SmartAsset, Rebecca Lake CEFP shares some tips for financial advisors when it comes to hiring new employees and building a team. This is usually an indication that an advisors’ business is growing and that she is ready to offload some responsibilities. Often, many advisors wait too long to hire someone given the time and cost involved, however hiring the right people is paramount to helping your practice succeed.

Lake recommends implementing a team structure with small groups working together and responsibilities clearly defined and distributed. This can help people focus on their strengths and gain more expertise with their tasks. For instance, a member can be in charge of outreach to new clients to ensure the practice has a steady pipeline of prospects.

Depending on the size of the firm, teams can be organized differently with 3 common approaches - vertical, horizontal, or hybrid. A vertical team structure allows the advisor to focus on meeting clients and managing portfolios, while other employees provide support and handle other tasks. This is the way that most practices are set up. 

In order to find the best structure for your firm, Lake suggests making it consistent with how your firm is currently organized. For example at a small practice with a sole advisor, a vertical approach is ideal. She also suggests defining key roles for each member, outlining team goals, and selecting appropriate members for each team based on skills, personality, and experience. 

Finsum: Growing a financial advisor practice requires going beyond just client outreach and portfolio management. It requires setting up efficient and scalable systems. 

For ETFTrends, Tom Lydon explains how direct indexing can aid advisors with retaining and recruiting clients. Both of these are integral to growth for any thriving advisor practice while unsatisfactory performance in these areas can compromise success. So, advisors need to apply constant effort in these areas.

With direct indexing, advisors can forge a stronger connection with clients especially those who are more knowledgeable and self-educated. This group is more likely to appreciate the benefits especially in regards to tax savings and greater customization while retaining the benefits of passive investing. 

Direct indexing achieves this because clients will own the actual components of an index in their own separately managed account. However, the components of the index can be adjusted based on the needs or desires of the client. For instance, a client who is passionate about the environment may want to exclude fossil fuel companies from their holdings. These can be replaced with different stocks that have similar factor scores in order to continue tracking the benchmark. 

In terms of retention and recruitment, direct indexing leads to more conversations about a clients’ values, tax situation, and financial position. By optimizing these factors, advisors can add more value for clients and increase their chances of reaching their financial goals. These qualitative benefits are on top of the additional 1 to 2% of alpha that direct indexing adds to portfolios.

Finsum: Direct indexing has many benefits for clients. But an underrated one for advisors is that it can assist with client recruitment and retention.

Regulation Best Interest (Reg BI) was approved in 2019, although enforcement has only picked up this year. The law requires brokers to only recommend products to customers that are in their best interest. Brokers also have to be transparent with customers about any potential conflicts of interest and financial benefits to recommendations they make. 

For Investment Executive, James Langston covers Monmouth Capital Management’s multiple violations of Reg BI which has led to expulsion from the industry from FINRA. Monmouth is being charged with excessive trading of 110 client accounts between August 2020 and February 2023 by 6 company reps, leading to losses of $3.9 million. 

Unfortunately, many of the victims included ‘Gold Star’ families with their investment proceeds coming from death benefits from a family member passing away while serving in the military. 

 In addition to FINRA taking action against the brokerage, the Department of Justice and SEC charged Caz Craffy, a former US Army financial counselor and Monmouth broker, for defrauding clients through excessive trading and risky investing. He also had a blatant conflict of interest given his dual roles as a broker and financial counselor. Overall, he earned $1.4 million in commision from clients with losses of $3.4 million due to bad trades. 

Finsum: FINRA, the SEC, and Department of Justice are pursuing action against Monmouth Capital Management due to violations of REG BI and mismanagement of clients’ funds.

A combination of factors like high rates and weakness in commercial real estate have conspired to push REITs lower over the past year. Yet, many billionaire investors are seeing this weakness as an opportunity to scoop up shares as discussed by Jussi Askola for SeekingAlpha.

He notes that Blackston’s Jon Gray and Steve Schwartzman have bought more than $30 billion of REITs over the last 18 months. Interestingly, they see more value in public REITs than private real estate which makes sense given greater drawdowns.

Similarly, Brookfield Asset Management’s Bruce Flatt has also been aggressively buying REITs and remarked in a recent interview that “I would say one of the great purchases today is real estate securities because you are buying them at a fraction of what you would trade them at in the private sector. REITs that have high-quality assets trade at enormous discounts to the tangible value of their assets".

Starwood’s Barry Sternlicht shares this bullishness as well. In a CNBC interview, he said that “There are some unbelievable bargains in REITs. We are already buying some stuff in the public market because I do think that rates are going down." 

Overall, these investors tend to have a more long-term perspective and have also managed to thrive through multiple cycles. It’s clear that many billionaires see current weakness as temporary and see REITs as a big winner once the Fed starts cutting rates. 

Finsum: REITs have been punished over the past 18 months, but some billionaire investors are growing increasingly bullish on the sector due to compelling value and belief that a positive catalyst is around the corner.