A recent study confirmed what has been known in the advisor world for some time: The talent shortage is real and now is having consequences.
In fact, as Mark Tibergien, CEO of BNY Mellon’s Pershing Advisor Solutions, wrote in his recebt Investment Advisor column, there was “a steady decline in year-over-year revenue growth for advisory firms, from a high of 16% in 2013, to 5% last year. Meanwhile, advisory staff salaries continue to rise.”
In my work with advisory firms, we’ve been wrestling with the talent shortage problem for years, and it is getting worse. The growth rate of many advisory businesses today is being held back — not because they can’t attract more clients — but because they can’t hire new advisors to help them work with more clients.
If this trend continues, I foresee independent advisory firm growth slowing to a near halt within the next five years.
The good news is, as the Ghost of Christmas Future told Ebenezer Scrooge: “These are only visions of what might be, if you don’t change your behavior.” I believe we as an industry can change our behavior, and the future, but we must start now.
The first step is recognizing the problems, and the talent shortage in the independent advisory industry stems from two.
Issue No. 1
The first problem is that there are not enough graduates coming out of university certified financial planning programs to meet the demand for new talent in our growing industry.
I know the CFP Board has taken steps to increase awareness about careers in financial planning, but I’m not sure “awareness” alone is going to solve the problem fast enough.
Here’s some more good news: We could solve the problem almost overnight if we collectively worked together. We could attract a lot more students into CFP programs faster if we simply increased the number of scholarships for students in those programs.
Individually, we might not have much of an impact (except on the students we sponsor), but collectively, as an industry, we could make a real difference. To do that, it might not take much more than raising awareness of this solution.
At a recent industry conference, I found myself sitting next to an advisor who is CEO of one the largest independent RIAs in the country. He wasn’t even aware that CFP programs existed.
If he and the many successful advisors like him could fund several scholarships, we could grow more new talent.
As a graduate of a CFP program, I believe we all need to see these scholarships as an investment in the future, because without them, our industry may not have a very good one.
Issue No. 2
The second problem is how we work with CFP program grads when we hire them. My 2001 class of the Kansas State CFP financial planning school included several CFPs who all had a passion for the profession.
Today, I’m the only one (that I know of) who is left in the industry — and I don’t even do financial planning anymore.
The problem is internships and entry level jobs in our industry.
In my experience, the vast majority of independent firms of all sizes treat their interns and young CFPs as “clerical help” to work mainly on tasks that can’t be handled by overloaded administrative staff.
I’m not saying they don’t need the help, but this isn’t the solution. Try a temp agency.
If we want to keep our young talent in the industry, and heaven knows we need them, we need to take them seriously.
I believe we should standardize internship programs to ensure that students will get valuable hands on experience. I’m not saying they should work with clients, but they should work alongside advisors who do client work.
The same goes for entry level CFPs. Every independent firm should have a career track for young advisors that gives them the training and experience to reach their goal.
The turnover rate for young advisors is too high — and is contributing to our talent shortage.
It’s ironic that at a time when increased media coverage of events and issues in the financial services industry is driving clients to independent advisors in unprecedented numbers, our industry is struggling to add new advisors.
We have the resources to solve the twin problems, but we’re going to have to work together to resolve them.