When you think of wealth management
and investment banking
, Milwaukee isn't the first place that comes to mind. But Robert W. Baird & Co.
, a corporate darling of that Great Lakes city, has been making waves in the finance world. With only 2,400 employees, this small and scrappy shop offers a full suite of services and is one of the top underwriters of U.S. municipal bonds. But wealth-management is its strong suit. FINS sat down with Mike Schroeder, president of Baird's private wealth management group, to discuss the opportunities born from the crisis and why his firm has steadily signed on senior talent since 2006.
Kyle Stock: I understand that the firm was in growth mode recently, would you detail that hiring?
Mike Schroeder: Since the beginning of 2008, our total employment has increased approximately 8% and we've successfully recruited 110 senior-level people across all of our businesses; 70 of those were added in 2009. It was a record year for us [in terms of] private wealth management recruiting. We hired 105 financial advisors, mostly veterans. 2010 is off to great start as well. We've hired nearly 20 financial advisors so far this year.
KS: How about more junior or inexperienced advisors?
MS: We hire roughly a dozen to upwards of 20 per year.
KS: In looking at your financial reports, it appears that your headcount peaked around 2001 and hit a trough in 2006. Can you walk me through those transitions?
MS: At the turn of the decade we made a strategic decision at that time that we were not necessarily going to be in the scale business. Our goal was to be the No. 1 middle-market firm in the world and to build a very high-end practice focused on preserving and protecting wealth and serving the wealthy. We were moving upstream.
KS: "Upstream" in terms of the quality of your employees or the net worth of your clients?
MS: It's actually both. As you hire more experienced financial advisors from across the country, they tend to have a more affluent client-base. Starting in 2006, a lot of turmoil began to happen in the industry. It has provided unbelievable opportunities.
KS: Opportunities in terms of dislocation like we saw at Merrill Lynch?
MS: I wouldn't single out any particular firm, but I would tell you that not only for Baird but for other firms as well competing for talent in the industry, the dislocation or the challenges that the four major firms have faced, has really forced a lot of talent or senior-level management to consider some career options long-term. They were forced into shotgun marriages with companies whose cultures did not necessarily mesh; that sort of change usually leads to opportunities.
KS: How about on the demand side? Are clients shopping around more for advisors? Are you seeing more interest from the coasts or abroad?
MS: It's not necessarily on the coast; I would say it's across the board. As Baird expands its footprint, we clearly are at the forefront of capturing assets and building relationships with new clients. Obviously, it's more focused around the 62 locations where we have offices.
KS: Has the client mix in wealth management changed at all in terms of individuals, institutions and small businesses?
MS: We've continued to expand our institutional business worldwide. Our institutional sales and trading department had their 15th record year in a row. On the private wealth management side, there's no question that our average household asset figure has grown. Our core clients, those investing $1 million or more, continue to drive the vast part of our growth.
KS: Do employees transfer often between the different units?
MS: I'm not sure I'd use the word 'often,' but it does happen. In 2009, we had 126 internal promotions and 38 lateral transfers. It's more common to see an employee join the ranks of financial advisors. Rarely do you see a financial advisor transfer to a corporate research role for example.
KS: When I interview someone about financial advisors, I always ask about turnover, because it's typically high. What is turnover like at Baird?
MS: Historically, Baird runs about half the pace of industry in terms of turnover. Last year, it was about 4.7%.
KS: That's impressive.
MS: Especially when you think about what's going on at the Big Four in the past few years. I want to say that the average industry attrition rate is about 13% to 15%.
KS: How do you keep it low? Is it simply hiring more experienced people? Compensation?
MS: It's all of the above. It starts with hiring top talent. Then it's providing a system to really thrive in an entrepreneurial environment that's employee-owned. And [finally] having a culture that focuses on what's best for our clients. Fortunately, given our size and 90-plus years of history, we have the ability to compete against anybody on Wall Street.
KS: What percent of your employees own equity?
MS: More than half of our associates worldwide now.
KS: What advice would you have for someone looking to join Baird?
MS: With the junior financial advisors, the way we bring new people into this business is by aligning them with a financial advisor or a financial advisor team. In today's world that gives someone the highest probability of success. It's a more successful strategy than hiring thousands of people like some of the big firms and hope that they make it.
KS: So you're looking for folks with a referral or a connection in the firm?
MS: It could be new individuals that are looking for a career change that have a demonstrated success in sales. It could be people within the financial services community that are looking for a more client-facing role. Generally, that person has three to six years of experience out in the world before making a career change. It's pretty rare hiring someone fresh out of college to be a financial advisor.
KS: How about at the senior level?
MS: First and foremost, we look at the quality of the people and whether they are a fit for Baird. We never hire any financial advisors unless they come back (to Milwaukee) and we get a chance to know them and for them to know us. We have all of our candidates and recruits spend a day, day-and-a-half with senior personnel.
KS: So it's really about a cultural fit?
MS: There's an old phrase that good people don't leave firms. Firms leave good people; and I think we've seen a lot of that in the past few years.
KS: Has the crisis changed the ways that you search for talent?
MS: It has provided us an opportunity to break into some new markets probably a little faster than we would have. I would particularly point out the Mid-Atlantic area. From there it's just mushroomed into a lot of different opportunities. It has worked [out] well in areas where we have assets in our other business units, like Charlotte, San Francisco and parts of northern California.
KS: What advice would you have for someone looking to move up in your firm?
MS: Demonstrate leadership. Get yourself involved not only in the firm but outside of the firm. We take pride [in] and support heavily outside activities, whether it be through charity, sweat-equity or real equity. This industry offers some tremendous opportunities for people who want to move into branch management ranks or other ranks within the firm.
KS: We've talked a lot about culture, how does Baird's culture differ from the other big wirehouses?
MS: [We have] a commitment to being a great place to work. For seven years in a row, we've made Fortune magazine's list of 100 best places to work. The only two people we're accountable to are our clients and ourselves. I would also add that we are very conservative with our balance sheet.
KS: If you had to choose, would you say Baird most resembles a corporate jet or a Harley-Davidson?
MS: Well, you're talking to a guy who owns a (Harley-Davidson) Heritage Softail Classic. I would say both. Harley-Davidson for the reasons of longevity, style and history that it portrays. And I would say a jet in terms of how this industry is so fast-paced and how it changes.
KS: Any particular parts of the country where we might hear about Baird growth in the next few months?
MS: We're continuing to build our presence in the Mid-Atlantic and we're looking at some unique opportunities in the Pacific Northwest and the Rocky Mountain region.
Write to Kyle Stock