The ongoing wave of retirements of baby boomers and a growing desire for relationship-oriented financial advisory services have led to significant hiring initiatives by a host of wealth management offices in Orange County.
Five-month-old Capstone Affluent Strategies has nearly tripled the size of its headquarters in a move to Irvine from Newport Beach, an expansion that provides room for its recent set of hires and more to come, according to Chief Executive Darin Pastor.
Pastor worked at JP Morgan Chase & Co. as a senior investment manager and then as a managing director at Prudential Financial Inc. before launching Capstone in a bid to “break away from the corporate agenda … proprietary mixes and sales quotas,” he said.
Capstone’s new office at 2600 Michelson Drive is 10,000 square feet, and will house 65 financial advisers when it officially opens in early April. The sum reflects a group of 20 employees who moved from the former headquarters, plus 45 recent hires.
Capstone has six other offices in California, including two remaining in Newport Beach and another that opened in San Diego last month. It also has smaller offices in a handful of states, including New York and Texas.
“We’re expanding rapidly, in bodies and productivity,” Pastor said. “We’ve brought in $35 million in assets over the past month-and-a-half, and we are at $450 million in assets under management right now.”
Pastor said Capstone’s independent nature has helped the firm bring on talent.
“From a recruiting point of view, people want to join something independent,” he said. “And we’re taking recent college graduates. We provide an eight-week licensing course and a three-year mentorship program. And through our employee-stock plan, they know they can have ownership. That’s been a game changer. It’s been a good time to expand.”
A ready pool of young financial professionals makes for good opportunity for wealth managers, according to Marc Foster, who leads Foster Wealth Management in Newport Beach as part of New York-based UBS Financial Services Inc. (see related List, page 26).
“Demographically, the majority of employees right now are older baby boomers who are going to roll into retirement,” Foster said. “There’s going to be a huge lack of talent. So I would say that if a young person can get into this business, get tied to a team and make it through five to 10 years, business is going to be so lucrative. You’re going to have the biggest [part of the] population retiring; the talent to take care of that isn’t there.”
Consumer Confidence
Tapping into fresh talent won’t be easy for some companies, especially since the “shattering of confidence in the system, which caused people to lose faith in institutions,” according to Foster. “People have faith in individuals, not institutions. So that creates a dilemma for big firms in terms of hiring. And what you see now is groups like ours that hire into individual groups within a bigger firm.”
Foster’s team of six operates more or less autonomously, though it is associated with the larger UBS infrastructure, he said.
Consumer trust also has been a key issue for Milwaukee-based Northwestern Mutual Life Insurance Co. as it aims to add 5,500 financial advisers and interns this year on top of its current base of 6,500 full-time financial representatives and 2,000 interns across the U.S. The hiring initiative calls for 54 new advisers across its OC offices in Irvine, Newport Beach and Orange.
Northwestern Mutual provides insurance and other financial services through various arms, including Northwestern Mutual Investment Services LLC and Northwestern Mutual Wealth Management Co.
“The combination of volatility in the financial market in the past few years, the uncertainty, the questioning of financial institutions … who can a consumer trust?” said Shawn Mackey, managing director at the company’s Irvine office, which currently houses 35 employees.
“That leads us to look to having more trusted relationships with our clients. We as a company experience the tremendous desire for people to have a plan for their long-term financial security. The demand for what we’re doing … is great.”
The Irvine office is planning to add 18 new full-time representatives and 40 new college interns this year.
“10 of the 18 are already committed to join us, and the lion’s share of our college representatives will join us in the summer,” Mackey said.
Northwestern Mutual’s office in Newport Beach is expected to hire 24 additional financial advisers and 30 interns this year, and its Orange location will gain 12 new advisers and 15 interns.
The firm said it will hire 48 financial representatives along with 63 interns across two of its Los Angeles offices.
“I also believe that [having] a mutual form of ownership under a life insurance company [helps],” Mackey said.
“The policy owners ultimately are the owners of the company. That provides a unique stability and alignment between the clients’ interest and that of the company. People appreciate that.”
Tougher With Size
Larger firms could face some challenges by virtue of their size as they try to meet increased demand and keep up with retirements, according to Chandler Root of Merrill Lynch, who oversees the firm’s OC operations as part of southwest region of its Global Wealth and Investment Management division.
Root said handling turnover gets more difficult “as you get to 100 [employees], certainly once you get to the thousands.’
Merrill Lynch has about 17,000 financial advisers overall and has to continue hiring to cover attrition, he added.
So far, so good, according to Root, who said Merrill Lynch has increased its headcount consistently in recent years.
“I think that for wealth managers, it’s absolutely a good time to be expanding,” he said.
“I don’t think there’s anybody that’s not thinking about growing. It’s expensive to bring somebody on. It outstrips the profit for some time … but [it’s] going to bring a return.”
