The beginning of the year into the late spring historically has been a popular time for financial planning firms to hire as firms seek to recruit college graduates graduating in May, bring on additional support for the extra work during tax season, and to service the increase in new clients starting their financial planning engagement with the firm.  Even though the market has been down for the last year, we anticipate more of the same type of hiring demand this year, based on the increased activity we have seen over the last month or so. The recent Schwab compensation study echoed this as well, reporting that RIAs have stated that recruitment has become the highest priority, topping attracting new clients for the first time.

Here are a few reasons why you might want to start your hiring process sooner versus later, if you have any plans to hire anyone in the next twelve months.

• Less competition -  firms billing on AUM have seen a decrease in revenue since the market has been down year to date.  Less revenue typically means firms will try to reduce expenses, so they put their hiring projects on hold or cancel them altogether.  Now fewer firms are vying for the same candidates, so if you’re willing to make the proactive investment now, your probability of hiring your first-choice candidate is higher.

• More manageable compensation - while the job seekers still have most of the leverage, even in the current down market, there is less of a chance that they will receive as many offers since there are fewer firms seeking to hire. This reduces the likelihood that you will have to participate in a bidding war to secure the right hire from your firm. 

• Starting the Year Off Right - job seekers usually take some time off during Christmas and New Year’s to spend time with family, reflect on the prior year, and plan out the year ahead. During this time, job seekers are usually very open to different opportunities as they assess their options. If this window of opportunity is missed by a potential employer, it could be many more months before the same job seeker is available and/or open to something different. If your plan is to wait until your ideal recruit waits to get their retention bonus and is eligible to leave, it is too late. 

• Follow Your Own Advice - many planners are counseling their clients to stay the course, keep investing, and buy securities “on-sale” that have lost value. Some firms are doing this with human capital assets for their businesses. It worked well during the early days of the CoronaVirus pandemic market decline in 2020, and it is working well now for the firms that have kept the pedal down on recruiting new talent and making hires over the last year. 

Here is what you need to be doing right now to get your business ready to hire in 2023:

• Meeting with Your Current Team - You are probably already doing some type of annual review, so ensure you ask them how they are feeling about the workload. Maybe something like this, ‘do you have capacity right now? Or ‘how is your capacity being constrained?’

• Revisiting Job Descriptions - sometimes descriptions can become stale as time goes on. It is a good practice to do an annual audit to ensure everything is being captured and there is no overlap. 

• Promoting People - if you have been contemplating promoting someone on your team, do it before it’s too late. Now you have a better sense of what areas your organizational chart needs backfilling, redundancies, etc.

• Set your hiring strategy for team retention not market timing - the market is going to do whatever it wants, and trying to time hires based on market fluctuations is just like telling your clients to do the same thing with their portfolios which doesn't work so well. Commit to making the hires necessary to keep the appropriate service levels, ensuring your team is not overworked, and allowing you to capture future growth. Plus the market is not going to stay down forever. 

• Reviewing financials - market declines impact AUM firms more than any other revenue model, and AUM is still the most prevalent model by far. It is worth noting that this is shifting though - more firms that contact us are utilizing flat fee and subscription models, among others, which further insulates them from market fluctuations. As of this writing, the DJIA was down ~8% YTD, and S&P 500 ~16%. Admittedly, far from ideal returns, but considering firms who employ well-diversified portfolios for their clients their rates of return are better than the above indices. Furthermore, if a firm has been operating at a +20% profit margin this can provide an additional cushion to buffer down markets. Firms with these characteristics, plus healthy cash reserves and lines of credit, are in a much better position to go on the offense, when many other firms are playing defense. 

We hope these were helpful as you develop your game plan for 2023 success. The bottom line is if you are planning to hire someone, you can start now and probably squeeze out some human capital alpha or you can take a wait-and-see approach and likely find hiring more difficult, time-consuming and frustrating as the year goes on.