The financial industry has accumulated a series of black eyes in recent years, for everything from the role that mortgage-backed securities played in the Great Recession to the scandal over LIBOR, and mutual fund and ETF managers and providers haven't escaped the damage. Because the causes of the financial crisis were broad, so, too, has been the fallout - and asset managers have much to do to attract the top young talent they need to support social media and other tech developments that are now so important to their business.

With so much negative publicity, it is no wonder that recruitment and retention in the financial services industry, including money management firms, have been adversely affected. The calculus is ominous. The percentage of elite college grads heading into financial services has steadily declined in the wake of the financial crisis of 2008, New York magazine recently reported, citing Princeton's experience: just 11.5% of the class of 2012 went to Wall Street, compared with 46% in 2006. Some of the chief beneficiaries of this shift have been tech companies.

What's at Stake for Asset Managers

Tech-oriented grads are the ones that asset managers most need at a time when Twitter, LinkedIn, Facebook and other social media are being embraced by the industry. Forty-six percent of fund firms across the country are using Twitter to communicate with customers and 33% employ Facebook to promote products or services, according to the most recent Money Management Executive technology survey. These grads also bring a special understanding of "big data," cloud computing and other innovations that are reshaping the business. (Twenty-two percent of the surveyed firms adopted "big data" management tools last year while 17% turned to cloud computing for the first time.)

To regain the center of the radar screen for top students, fund managers should consider a more proactive posture in their recruitment programs, revamping messages and using cutting-edge channels of communication. But to meet the challenge head-on of competing with tech companies, and their attractive lifestyle, fund managers will have to take a hard look at culture.

To begin with, the industry, through its trade groups, must confront the issues directly, conceding that certain things went wrong in recent years. Messages keyed to campus audiences need to recount those lapses and describe the changes put in place to prevent their reoccurrence. Tougher ethical guidelines and better risk oversight mechanisms should be at the heart of those messages. Changes in financial compensation that have lessened the incentive to take reckless risks should also be described. In short, the industry needs to show that it has cleaned up its act.

Work-Life Balance

Tech companies pay well for top applicants, but typically still lag behind the financial industry. Where they excel, however, is on the soft side, offering flexible hours, a dress-down environment and a seemingly endless list of youth-oriented perks.

Financial firms can't replicate all of Silicon Valley's attractions, nor should they try. That said, improvements in work-life balance and tangible investments in the long-term development of employees will go a long way to bringing in a richer mix of recruits and keeping them from leaving. Recruiters will be better armed if they can describe programs of flex time and telecommuting. For the long term, opportunities should be available to take a break - with secondment programs, for example, that allow employees to work a year, say, at a charitable organization. Junior employees might also be eligible for subsidized advance degrees while mid-level staffers could apply for sabbaticals.

Some larger companies might want to consider a formal two-tier approach to lifestyle choices, with options to choose more, or less, work-life balance. After all, some people want to keep to the fast track. For such a program to succeed, though, a firm would have to think through the implications - in terms of compensation and promotional paths - and be clear about them.

It will take some work to find the right people for this new mix. Test scores and grade rankings won't do it alone. Instead, recruiters will have to get to know the candidates well enough to explore their motivations and long-term goals. Savvy marketing to the campuses will help bring the right candidates to the recruiter's table, and that means a heavy reliance on social media. Firms that succeed in attracting a diverse mix of students, and in delivering on their promises, can relax a bit. Those satisfied recruits will quickly go online and get the word out - and help bring in next year's class.

James L. Schroeder is executive vice president of DHR International, a global executive search firm. He specializes in financial services, including money management.

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