This news service spoke to a prominent figure, and regular commentator, in the North American wealth management sector about the talent crunch issue. While other challenges may dominate the headlines right now, the task of ensuring that sufficient people enter the profession is an important one.
With current events acting as a brutal reminder about the importance of strong wealth management advice and guidance, it should also bring home the stark reality that the industry faces a talent shortage.
The average age of advisors has been creeping up. With trillions of dollars of assets slated to change hands over the next few years as Baby Boomers pass on, there is a need for a new cohort of advisors to pick up the baton.
One person with plenty to say on these topics is Allan R Starkie, a partner at Knightsbridge Advisors, who has appeared in these pages before. Family Wealth Report recently spoke to Starkie about his views on the state of recruitment, talent management and development in the North American wealth industry.
FWR: How significant is the talent shortage issue that is
coming over the horizon and what steps can the industry do to
deal with it?
The steady loss of client-facing, revenue-producing advisors in the US is staggering. In 2007 we had 330,000 of them, by 2017 the number had dropped to 280,000, and continues to drop each year. Almost half of these professionals are over 55 years old, and only about 92,000 of them are focused on high net worth and ultra-high net worth clients.
Do you think industry associations or some other groups
should take a lead?
I think someone needs to take the lead! The CFP is the designation most suited to generalist wealth managers, so perhaps they need to broaden their participation in developing more comprehensive training; but in actuality, I doubt if any professional organization will take the lead. It will end up becoming such a severe problem, that individual firms will have to create solutions.
Talent acquisition and retention is a constant challenge.
What would you say has changed the most in the North American
talent market over the last 10 years? What sort of forecasts
would you make for the next decade in terms of the areas and job
forms you expect to grow, and decline, and why?
The wirehouses and international money centers play musical chairs with the same pools of talent, while the RIAs (now creeping toward 20,000 companies) are sucking away huge numbers of talented professionals from all peer groups within the industry. I think this trend will continue as the available talent pool shrinks, and RIAs are the only type of firm offering wealth creation for these professionals through equity grants.
How are entities such as family offices changing how they
use headhunters? Do you see such organizations making more or
less use of external recruiters?
A family office is a very loose term. It could represent a holistic wealth management capability, or be nothing more than one belaboured sycophant helping buy new artwork. The multi-family offices and larger single family offices are often using headhunters; while the smaller ones rarely use external recruiters.
Where in the US do you see recruitment
There are many recruiting hotspots, but some of the hottest are San Francisco, Los Angeles, New York, Houston, Florida, and some Midwestern cities.
How long a shadow over wealth management is cast by the
great financial crash of 2008? Does it continue to deter bright
graduates and post-grads, as well as those from other
backgrounds, from entering the market, or has that effect
I do not think that the dwindling sales force is a result of the financial crisis, but of sociological change. The word “sales” has become a dirty word to younger professionals, and recent college graduates; while the swashbuckling aura of the Wall Street broker has lost its luster, and been replaced by the reality of the pragmatic, hardworking, client-focused plodder, that most people now associate with wealth management. The days of putting lipstick on a pig and selling it for millions are over. What is left no longer attracts ambitious young people.
We have written about how certain areas are fruitful in
generating pipelines for new talent, such as former serving
military personnel, even sports people. Any
As the industry grapples with solving the talent crisis, many pools of talent can be tapped. If we copy the successful Bernstein model, the solution might be to recruit initially for talent that possesses sales DNA and ego drive. These people can be trained to become wealth managers. Many sources of such professionals can be found among the military, as well as other types of sales forces to include: pharmaceutical sales, mortgage origination, wholesalers, and many others.