WM Market Reports

What’s Next For The RIA Workplace

Charles Paikert, New York , September 8, 2022

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A new report from DeVoe & Co examines how issues such as remote work, compensation incentives and performance assessment have become crucial for RIAs in the aftermath of the pandemic.

When it comes to the workplace, advisory firms have a lot of work to do.

In the wake of the Covid-19 pandemic, attrition, compensation incentives, remote work, employee engagement, performance assessment and career progression have emerged as critical concerns for the industry, according to the latest Talent Management Study from DeVoe & Co.

Slightly over one-third of registered investment advisors surveyed by DeVoe reported higher or somewhat higher attrition rates over the past year, with firms having over $1 billion in AuM suffering even higher losses. And 80 per cent of large firms reported that the majority of their firm at least worked partially remotely.

Talent shortages and NextGen succession and readiness continue to be major concerns. DeVoe found that half of the advisory firms surveyed had either no structure or lightly structured training programs for junior employees and 70 per cent did not have any formal mentorship programs.

“These findings demonstrate the need for RIAs to begin focusing on talent management,” David DeVoe, principal of the San Francisco-based consultancy and investment banking firm, told Family Wealth Report. “Firms need to take decisive action to prepare a new generation for leadership roles.”

Optimal incentives
Nearly two-fifths of surveyed firms reported declines in employee engagement, resulting in increased employee dissatisfaction and attrition. According to DeVoe, a lack of incentive compensation for employees has been a major “missed opportunity” for RIAs.

Current incentive compensation structures are not always in line with firm goals, according to the study. Incentives for new client revenue, while popular, are in fact a discretionary bonus, DeVoe argued, and not an optimal structure. Client satisfaction and retention, on the other hand, is underrated, according to DeVoe.

“Firms should make retention more sensitive,” he said. “If an advisor loses two big clients that can be a big deal.”

Talent management programs should include career pathing, assessments, promotions, learning and development, recognition and compensation review, according to the study.

“How can you be an advisor of choice for a client if you’re not an employer of choice for an employee?” asked Greg Friedman, chief strategy officer for Wealthspire Advisors.

Stepping up
To boost engagement, Friedman suggests giving employees opportunities to have a voice in social activity decisions and hosting recognition events. “It’s an easy way to delegate these activities while giving younger employees a way to feel empowered,” he said.

Firms also need to improve their recruiting and onboarding experience, starting with helping new employees envision their future at the firm, the study stated. RIAs should also be constantly recruiting and hire ahead of projected need to both support current employees and “prevent the kind of strain that can lead to retention problems.”

Performance reviews which help employees take the next step in their careers are also critical and should be more frequent, DeVoe said. “It’s probably not your favorite thing to do, but it provides a springboard for the leadership team to start coaching the staff,” he explained. “And more frequent reviews help optimize performance by giving real time feedback on where employees stand and what they can do to improve.”

Future of the office?
Perhaps the biggest variable in the new post-pandemic workplace is the future of remote work.

“Returning to the office may prompt an open-arms welcome from employees,” the study noted, “or it may be the reason they leave the firm.” A PricewaterhouseCoopers survey of employees found that 26 per cent prefer full-time remote work while only 11 per cent preferred fulltime in-person work. Nearly two-thirds preferred a hybrid approach. 

While being in the office facilitates culture, learning and relationships, RIAs must tread lightly when it comes to mandating a return because “employees have the upper hand now,” DeVoe noted.

Flexibility is key, DeVoe said, citing a model being used by Mercer Advisors, one of the industry's largest and most successful RIAs. Mercer’s customized model provides guidelines and examples for being in the office purposefully, according to chief talent officer Martine Lellis, as well as flexibility that aligns with a given role or geography.

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