The Five-Step Process To Hiring Amazing Junior Financial & Insurance Advisors

A few weeks ago, I did an article about people and culture article, specifically focused on the three best practices to coaching a junior advisor. You can read it here. A lot of you reached out to me over it, and some great conversation was had. This is part two of this series on people & culture.

Recently, I read a great article about the “unicorn employee” written by Ryan Holmes of Hootsuite. If you haven’t read it yet, I highly recommend you do. In it, Ryan talks about the five signs that you are (or have working for you) a unicorn employee. That is, a one-in-a-thousand employee who really adds huge value to the job. To quote Ryan, unicorn employees:

“[Are] staff who possess a unique set of qualities that make them extremely rare and valuable. Like actual unicorns, they’re hard to find, but once hired, offer up enormous benefits in the workplace. To name a few, they shatter expectations, raise the bar for everyone and are simply a joy to be around. Unicorn employees can literally take your business to the next level.”

So why bring this up? Well, the difference between hiring a really amazing financial advisor junior (a unicorn advisor) or a mediocre one can be in the six figures of opportunity cost. A unicorn advisor will help you grow your book, handle any transitions gracefully, and find value where you may have missed some. A poor junior financial advisor will take too much time to train, require constant handholding, and fail to take initiative on opportunities. They may be a net drain over time.

This means that hiring a strong junior financial advisor is imperative. But how do you do that? Thankfully, science has the answer and we’re going to build a process around it.

The Most Important Study Ever Published on Hiring

To answer the question of how to build a hiring process, let’s talk about the most important hiring study ever published. In 1998, Hunter and Schmidt released the seminal meta-study on hiring. They looked over 90 years worth of research and tens of thousands of candidates who were hired and received on-the-job performance reports later on. From this data, they uncovered which types of interviews and scores best correlated with how the candidate did actually working in the job (through yearly reviews created by the once candidate’s supervisors).

What Hunter and Schmidt wanted to understand, fundamentally, was what interview processes led to the best results. What should companies apply to their own hiring processes? Was it structured interviews, unstructured interviews, general mental abilities, work sample tests, job knowledge tests, years of experience, age, etc. Here were the single variable results:
Financial Professionals Should Understand the Results of This Study for Hiring

So what do these numbers mean? The validity, or r-value, is how worthwhile a measure is for determining how the interviewee will perform on the job. This is a linear regression model but, math aside, it tells you the effect of any given variable on job performance. That is, if someone scores very highly on a GMA test, you know that this correlates with 51% (0.51 r value) of their on-the-job performance a year later. In other words, a high score on a GMA test predicts higher performance on the job in the future. A low score on a GMA test predicts lower performance on the job. Likewise, years of education is fairly useless at predicting the results of an applicant in the workplace (surprise, surprise!). In fact, it will only help you move the needle by about 10% in either direction. Someone with ten years of education will only be slightly more likely to have good on-the-job results than someone with zero. It’s just not a very valid variable.

So knowing all this, let’s turn our attention to hiring the right person to grow your business!

Create an Objective Hiring Process

So what is your first step before hiring? Process, process, process! If you’re a reader of my blog, my love for process is undoubtedly shocking. But, as in most things I write about, the difference between putting together a process and winging it is night and day. You wouldn’t go to a client meeting unprepared, why would you try to hire a candidate without putting some thought and structure towards it?

This process should also be objective. Now, this may seem like a silly point to make – why bother with objectivity? Shouldn’t you find someone you click with and hire her? Well, absolutely. But that subjective like of a candidate does not tell you everything you need to know. I suspect we’ve all hired or worked with people who are incredibly fun to be around and produced almost no results. I know I have, and it was a costly mistake both in dollars & time invested, and in the morale slump it created to fire the person.

Worse still, liking someone WILL distract you from their shortcomings. This is a very dangerous situation to hire through, and is responsible for many poor hiring decisions. If you are a human being, you are subject to a nefarious cognitive heuristic called confirmation bias. Confirmation bias is the tendency to see new information in light of your preconceived beliefs. It’s the reason why two people on opposite parties can watch the same presidential debate and come out with wildly differing opinions of why their candidate won. They’re both seeing the new information (the debate) in light of their old beliefs (my candidate is better) and interpreting that new information to reinforce the old belief (my candidate won the debate and therefore is better).

Hiring is no different! If you like a candidate going into your second or third meeting with them, they would have to do or say something egregiously awful to change your mind. It’s a type of inertia – a getting to yes situation. You’ve already internally made a decision to hire them, and now you’re just crossing your t’s and dotting your i’s.

A properly built objective process helps nip this in the bud. The goal is to measure candidates as objectively as you can through a myriad of different steps. The key is that the measurement criteria and steps are weighed ahead of time. At the end of the steps, you simply tally up the score the candidate has gotten through the process and you choose the candidate with the highest number. It’s a very analytical way of approaching a job hire that helps minimize your own biases.

So let’s discuss the four (or five) steps worth taking to hire a junior financial advisor.

The Four (or Five) Steps to Hire an Awesome Financial Advisor

So before we go into the specific steps, I want to quickly focus on how you should structure this process. Before you start going through the steps, take a step back and figure out how you want to grade each step of the process. That is, for each candidate and each step, you want to set a score of 1-to-10 (or 1-to-4). This might be broken up into subcategories being ranked. For example, during a meeting, you may want to dig into a candidate’s analytical capabilities, empathy, and teamwork, assigning each of these their own score from 1 to 10 and then averaging an overall score. The key here is that you must do this BEFORE you start the interview process. This makes sure you don’t end up altering the weighting schema to ensure a favored candidate goes through.

That being said, here are the four steps I think worth taking. Note that the fifth step is optional – I don’t generally expect people to do this, but I would be amiss if I didn’t at least briefly discuss it. Moreover, after each step, feel free to eliminate the lower performing candidates.

Step 1: Structured Employment Interviews

The first step of any hiring process should be the structured employment interview. This is a very powerful predictor, able to predict 51% of a candidate’s on-the-job performance. A structured interview differs from an unstructured one insofar as you have a number of specific questions you will ask every candidate.

The questions you pick are on you, but they should be looking for specific answers or results. This does not necessarily mean they are technical – in fact, I would stay away from technical questions during the structured interviews. Instead, you should focus on understanding core traits that matter about the candidate. Strengths, weaknesses, examples of working under pressure, being a good team member, etc. Aly, our CEO at Finaeo, told me that the number one thing he looks for is someone who cares about his team. That doesn’t mean it’s the number one trait you are looking for, but it does mean you need to know what you’re looking for ahead of the interview.

Another example: when I was looking to hire a venture capital associate, I used structured interviews to get insight into the candidate’s intellectual curiosity, interest in technology, big picture thinking, social intelligence, and risk tolerance (go big or go home). The questions I asked were directed to suss these factors out. I then graded each candidate on each feature and averaged our their total to get a score for the structured interview.

Similarly, you should score each of these questions on the desired trait. If you have five traits you want to test for, ask one or two questions for each one and give the person a score for each after the interview is over. Then average out their total score. Or, if there’s a trait that is more important than all the rest, you can weigh it as a bigger portion of your overall score for the candidate’s structured interview. BUT, remember the little mental goblin of confirmation bias. If such a metric does exist, decide that it exists AHEAD of time. Not after you really liked candidate three and want to bump up her score. Stay objective!

Step 2: Work Sample Tests

The second step in a great hiring process for financial advisors is incorporating a work sample test. The work sample was the number one best independent predictor of on-the-job success (can predict 54% of the candidate’s success rate). This test can exist in a number of ways. During my time as a management consultant, case interviews were used for candidates. These were generally questions based on previous business problems the consultant interviewing had experienced. What he or she was looking for were the practical steps and thoughts around the issue. Generally, there were no right answers here – it was much more of an open question to see how a candidate would approach a problem. However, you can also ask questions with correct answers if you want to test technical ability. If you’re a financial planner or insurance agent, you may want to give the candidate a set of client facts and see how she would generate a plan for the client. If you’re a wealth manager, you may want to ask a candidate to balance a portfolio.  

Aly swears by the working session. This is spending a few hours with the candidate and collaborating over a specific business problem you face. When I first joined Finaeo, this is exactly what we did. The key here is that the problem is real and the candidate is actually helping you figure it out. Also note that friction is okay here. What you’re generally looking for is healthy discussion, good insight, and passion about the topic.

Once more, when it comes to measuring the candidate, set up an objective rubric ahead of time. Figure out what exactly you’re trying to learn about the candidate and grade them accordingly. Likewise, note that some of these work sample tests can be done as “homework.” If you want a candidate to set up a financial plan or balance a portfolio, you can easily send them a set of facts and ask them to email you a response document. If you do it this way, you can also keep grading even more objective by anonymizing the responses. That is, have someone remove names from each submission and grade them anonymously.

Step 3: Peer Ratings

The peer rating is the third step to the hiring process I would recommend (with 49% predictive power of on-the-job performance). A peer rating is asking the candidate’s coworkers to rate the candidate and averaging out the score over a number of them. Notice that this differs from the standard reference check (which has very low predictive power) in two major ways. First, a reference check is generally provided by the candidate. You don’t do your own diligence. But it takes a very poor candidate to send you to a bad referee. Second, a reference check usually uses people in positions of authority over the candidate – be it an employer, a professor, etc.

A peer rating is different. It also takes a bit more work. What you are looking for is to talk to people who have worked closely with a candidate at the same level. You shouldn’t approach the candidate for who these people are, but go through his LinkedIn history and find these people on your own. Of course, if the candidate has not yet mentioned to his place of employment that he is leaving, don’t jump the gun and out him. Go further back in his history instead, contacting people from previous companies who he worked with. Likewise, if he’s coming straight from school, find people who were in extracurriculars with him.

This requires a bit of digging on your part. Likewise, you should talk to a number of respondents. You never know when you’ll bump into someone who had a personality clash with the candidate. Remember the old adage – if you meet one jerk in a day, he’s a jerk. If you meet three jerks in a day, you’re probably the jerk. Talking to multiple people lets you quickly ascertain who the real jerk is! You can also ask them to rate the candidate on the different traits you are interested in and aggregate the scores.

However, due to the amount of work this takes, I’d very much recommend filtering based on the first two steps first. Try to cut the number of candidates down to two or three first before investing this much time and energy in any one potential junior.

Step 4: Unstructured Interviews, a Binary Test for Your Top Candidate

This is the very last step. The unstructured interview is the coffee or beer meeting. It’s the fit meeting or the “getting to know the candidate” meeting. It’s, generally, the very first thing people do when looking to hire. But notice that, independently, it has a very weak predictive rating of on-the-job success (38%). I know this seems counter-intuitive. Everyone swears up and down that they can spot talent through a conversation. The reality is, I can’t, you can’t, and probably no one can either. And it shouldn’t be. In fact, I have put it as the last step on purpose. Putting it at the end of the process helps reduce bias during the first three steps. If you decide that you like a candidate ahead of time, you are more likely to grade them generously through the subsequent steps. Leave this step to the very end to reduce as much of your own bias as possible.

That being said, it’d be a bit crazy to hire someone without spending some time making sure you can stand one another. What you are trying to determine here is whether you are compatible with the candidate. Is this the kind of person you could work alongside for eight hours per day in a small office? But this is very much a binary question. You either like the candidate enough to work with her or you dislike her enough not to. But you’re not rating the candidate by HOW MUCH you like her. You are merely qualifying or disqualifying entirely based on whether you do or do not like the person.

I’d highly recommend leaving this step only for your top candidate. Get a drink or a lunch with her and just make sure you can get along. If you can – great. Hire that person! If not, go to the second highest ranked candidate and check again. And so on, so forth.

Step 5 (Optional): General Mental Abilities

I am mentioning this step because I would be remiss not to. It should be noted that I don’t really expect anyone to do this. However, if you read the paper in its entirety, one thing the researchers make clear is that general mental ability is the most important predictor for on-the-job success. This was true for blue collar workers and white collar workers. This was because it stacked with many of the other measures incredibly well. Check out the table below:

Take a look at the multiple R. That tells you how much predictive power any given measure gets when combined with GMA tests. That is, if you combine a GMA with a work sample test, you’re at 63% predictive power. Ditto for a structured interview. That’s some pretty powerful stuff!

However, in my years in various roles, I have only seen one company (McKinsey & Company) use this sort of test for recruiting purposes. Now, that’s not to say you shouldn’t use some form of IQ test to measure potential employees if you can. Unfortunately, doing so may be difficult. For one, interviewees may balk at this form of process. More importantly, though, it may be hard to find a good general mental abilities test. You likely don’t want to use an online IQ test and you probably won’t hire a psychiatrist to administer a legitimate, multi-hour one. There are some interesting middle ground tests that don’t require psychologist-administration. The Kaufman Brief Intelligence Test is such a test. However, note that you will need to learn how to administer it on your own. This is why I list this one as optional. If you do it, it’s powerful, but there are some serious limitations.

Note that if you decide to administer a GMA, you should make that the first step. In fact, you can use it to eliminate candidates who don’t score highly off the bat. So if you’re in a situation with too many candidates, this is a great first weeding out method.


Overall, then, this four (or five) step process is incredibly powerful for picking the unicorn financial advisor. The key to each of these steps (except the unstructured interview) is to stay objective. Create a grading rubric ahead of time, figure out what you’re actually looking for, and grade based on it. Do not qualify candidates based on how much you like them – qualify based on how competent they are on the traits that you know matter for the role. Disqualify them if you dislike them. So, what do you think? Have you ever used an objective interview process and what were your results? Tweet @finaeoinc to let me know, and please subscribe to the blog.