We are operating in an environment that makes it challenging to recruit and retain good people. Developing an effective talent strategy requires an understanding of what compels people to join your firm and what compels them to stay. Usually, high unemployment would give the employer more choice in who they hire and what they pay. For financial advisory firms, however, the leverage has shifted to job seekers.
As has been reported ad nauseam, our business is being redefined. The market cataclysm of 2008 created distrust and cynicism about this business. Greed, fraud and manipulation are words now associated with financial services professionals, regardless of whether one is a broker, advisor, investment banker or lender. Meanwhile regulators are reacting with force, and new competitive models are emerging.
In terms of senior talent, our industry tends to trade experienced people between firms rather than promote from within. The pressure for immediate results often overrides the patience needed to invest in the careers of young people. As a result, the absolute number of financial professionals in all retail segments has shrunk over the past five years. Further, only 22% of the advisor population is under the age of 40, and only 5% is under the age of 30. With the average age of advisors in their 50s, the business is suffering from a growing cultural gap between advisors and clients, as well as a significant age gap between advisors and others in the business.
Yes, the industry as we know it today was built around the baby boomer, both as client and employee. A whole new generation of accumulators and inheritors of wealth have expressed the intention to move their business away from their parents’ advisors. The age and cultural gap is one reason, but so too is the inability of their parents’ advisors to communicate with them the way they wanted to be communicated with.
High unemployment aside, a couple of industries—the financial advisory business among them—are experiencing a talent shortage. As a result, hiring leverage has shifted to talented individuals who possess the smarts, work ethic and drive to succeed. These people have choices, and this is what they seek:
- A business with a compelling future
- Opportunities for growth, both personally and professionally
- A positive, constructive work environment in which motivated people can flourish
- Rewards appropriate to the job, both in terms of production goals and alignment with the behavior sought
- Above all, real engagement: a sense that they are valued, that their role contributes to the firm’s goals and strategy and that their opinions will be listened to and respected
While these job characteristics seem obvious, how do you transform ideas into actions and outcomes for your firm? First, take a good look at the four big challenges in attracting and retaining talent—capacity, generational differences, culture and leadership.
Capacity is key to growing one’s business, managing well and serving clients effectively. A lack of capacity becomes more apparent in firms that have not been able to hire the right people. Every financial services firm has a physical limit to the number of clients it can handle; there are only so many hours in the day. Effective technology ameliorates the pressure but does not eliminate it. Ours is a people business in which qualities like empathy, active listening, good judgment and wisdom still prevail. These qualities also influence whether firm employees will feel inspired by and committed to the firm’s mission. An ample and motivated work force creates the capacity needed for your firm to excel.
Much has been discussed regarding the differences between generations. Matures and boomers frequently use terms such as “we, us, team, unit, group, company and nation” to describe their efforts and achievements. Millennials, on the other hand, employ phrasing like “I, me, my, you are special, unique and different from anyone else.” It isn’t about the work ethic as much as the way people measure success. Boomers and matures often judge success by how many hours they put in, whereas current generations view success by what you get out of your time. Younger generations also tend to be more cynical and focused on immediate gratification, much to the frustration of those who labored long and hard with optimism and grace. This generational gap has many causes, but it is here to stay. Our leaders need to find a better way to communicate with up-and-coming clients and employees, speaking to their needs and work styles.
Leaders face the challenge of building and maintaining a firm culture that reinforces the right behavior and attitudes toward clients, colleagues and bosses. An article in Fortune magazine once described Ford’s successful turnaround, referring to a sign in the company’s main conference room that read, “Culture trumps strategy every time.” As organizations grow and expand to include new people with different values and different ideas, preserving a positive culture presents great challenges. You must ask yourself, “What do my people do when I am not looking?” If you are satisfied with the answer, then you are developing effective culture carriers within your organization. If you are uncertain about your firm’s climate, make it a priority to assess your cultural reality. At the same time, be open to the ideas of younger team members who may have valuable insight into today’s management and market challenges.
We often don’t notice leadership traits until confronted with a crisis, a difficult decision or an urgent circumstance. Some become leaders when they arrive at a position. Others learn the power of persuasion over time. Those who inherit prestige often find that leverage and title do not create a sustainable advantage. Those who lead by positive example and persuasion build a culture of commitment to shared goals. Assessing your firm’s leadership means becoming more aware of your own style and your relationship with your team.
People commonly confuse management and leadership. Leadership is a trait, while management is a state of being. In simple terms, there are two types of leaders:
- Strategic or conceptual
- Tactical or linear
Tactical or linear leaders are very project-oriented or fact-based—traits common in accountants and engineers. They like to ask the question, “Am I doing this efficiently?” Strategic or conceptual leaders are designers, storytellers, visionaries. They ask, “Am I heading in the right direction?” The best leaders combine conceptual and tactical strengths to give others a path for implementing the dream.
ARE YOU PREPARED TO LEAD?
In his book, “The Five Dysfunctions of a Team,” Patrick Lencioni identified five characteristic problems within teams and the symptoms of each:
- Absence of Trust—the failure to admit mistakes openly
- Fear of Conflict—the inability to debate
- Lack of Commitment—the tendency to ambiguity or to feigning agreement
- Avoidance of Accountability—the acceptance of low standards
- Inattention to Results—the focus on personal needs, not team success
These common problems help to define a good leader’s role in creating an effective team:
- Encourage the building of trust; be vulnerable.
- Don’t interrupt disagreements prematurely.
- Be comfortable that the idea may be wrong and don’t emphasize a need for consensus.
- Encourage your team to be accountable and don’t assume you have to be all the time.
- Set the tone; if you value anything but results, that is what you will get.
While the talent shortage is a real industry dilemma, leading advisory firms have the power to change this reality for their particular enterprise. Begin by attracting talented people to a dynamic, vital and positive work environment that offers the opportunity for personal and professional growth to a new generation of advisors.