When asked about their most valuable asset, advisory firm leaders typically laud their organization’s people. Certainly this messaging connects with the market, but are you sure this professed priority aligns with the realities of your firm? Do your own people see the image you portray?
Recently I participated in a meeting during which the partners praised their team, saying that they are the primary reason clients choose the firm. Based on the body language of some of the younger employees, I could see that this statement touched a nerve.
One of the millennial employees finally gathered up her courage to say, “If it’s true that your people are your greatest asset, then what are you doing to demonstrate to us how much you value that investment?” This brave question rendered the room silent until one of the partners asked her to explain.
Nervously, she went on to say that although she is happy at the firm, she often feels that the partners are interested only in how she supports them and not in her career development. She expressed her desire for dialogue around areas they think she should work on, and for encouragement to develop new skills or get exposure to other parts of the business. This employee described how she and her contemporaries share the same passion for excellence as the partners — and truly love working with clients — but know that the firm will not be the final stop on their trip to fulfillment.
What Your Peers Are Reading
I’m paraphrasing here, but this sums up her point of view. Leaders should take heed. The future of your enterprise depends on satisfied employees who wish to move the firm forward. This episode highlights some important tips for leaders: First, never use a positioning statement that does not resonate with your entire staff. Second, never invoke the quality of your people without demonstrating how you tend to their lives, their work and their careers. Finally, if you discover an internal disconnect regarding your culture, take inventory and then take action to resolve the conflict.
The need to create a unified firm culture relates to one of the greatest challenges facing advisory firms today: the shortage of talented new professionals. According to Cerulli Associates, our country currently has roughly 40,000 fewer financial professionals in all channels than existed in 2008. Add to this the rising average age of advisors and something must be done.
Financial services has characterized the human capital crisis as a “talent shortage,” but truth be told we also face a management deficit. Our industry struggles to recruit, retain and develop talent, and this difficulty cannot be attributed solely to our profession’s reputation as an undesirable place of work. This stigma contributes to the problem but remember, except for the big banks, insurance companies and brokerage firms, most financial advice is delivered through small businesses that operate as registered investment advisory firms or through affiliation with independent contractor broker-dealers.
Cerulli Associates reports that since 2008, the captive wirehouse brokerage world has seen its market share drop from a high of 42% to 36% today. As a result, the big firms have been trading senior experienced people amongst themselves instead of focusing on recruiting new talent. Meanwhile, as reported by Meridian-IQ, 744 new RIA firms opened in the past year. The relatively small size of most new firms means they often lack a human capital executive to develop a system for recruiting talent and developing careers. So not only are people shying away from the profession, but big firms are not hiring new people and small firms face management challenges.