Back in the early 1990s, I was a branch manager at a $2 billion regional bank with a 50-plus branch network. We decided to start an investment program, and I needed to hire a financial consultant. The first thing that crossed my mind was, Wouldn't it be great if I could bring someone on from a big-name wire house?
When I finally met the candidate, I hired him and was sure our program would take off. Once he started, he walked into the new office we built for him, sat down at his desk and for the next three months there he stayed, waiting for us to send him referrals. At the end of three months and after handing me his resignation letter, he shook my hand and said, "This will never work."
Why do I bring up this experience? Because today with the many layoffs on Wall Street and at big-name brokerage firms, some of these candidates are seeking out credit unions as potential employers. While that may seem like an exciting prospect, as my experience above illustrates it is critical that credit unions exercise proper due diligence when it comes to hiring investment advisers. The name of the firm they come from does not mean they will be successful in our environment.
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There are three key areas of due diligence that credit unions should focus on to ensure a successful investment representative hire. First, determine in advance what you need in a financial adviser versus what you want. Second, take the time to do a background check, including the candidate's production history, compensation history, compliance record, financial and personal histories and reference checks. And third, determine if the adviser is the right cultural fit for your organization.
Due diligence in hiring always starts with determining what your position requires and who you're really looking for. It's very common and natural for hiring managers to hire people who they like and people who are like them. But most credit union hiring managers have not worked with many top-producing, full-commission sales people. These people need to have different characteristics from typical credit union staff. Looking back on the example from my banking days, I thought that the Merrill Lynch pedigree would guarantee our program's success. I really didn't have the experience to know how to differentiate between a good Merrill candidate and a poor one. So unless the investment arena is your full-time focus, it's always good to talk through your needs with someone who has more experience in this area. That help could come from a consulting firm that specializes in helping credit unions with their investment programs or a recruiter who works primarily in the investment area. You might also choose to speak with someone at your broker-dealer or even someone at another credit union with a successful investment program. But make the time to seek out some assistance.
The second area in which to exercise due diligence has to do with checking the backgrounds of the candidates. This may seem obvious, but you would be surprised at how often this step is missed.
The third area of due diligence has to do with finding a candidate who will be the right cultural fit for your organization. This can be the toughest part of the process. As you consider candidates, forget all the preconceived ideas of what constitutes a great representative. Focus on who will fit into your organization's culture and who can develop the needed rapport and respect from your staff and clients. Will your clients and staff be willing to entrust their money to this person? Will your staff refer their clients to this person? A good strategy to create the needed buy-in is to invite key credit union staff members to participate in interviewing finalists.
How did things work out after the big name rep departed? I found a new rep from a firm unknown to me but who others highly recommended. I did the background checks and references and most importantly found a cultural fit for my staff and customer base. The new rep wrote $12 million in business his first year and became a top producer for our broker-dealer. Doing my due diligence took me from a program I was told would never work to an award-winning program that my customers loved. If you invest in your hiring process and do your due diligence it will pay rich dividends.
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