Financial advisors faced with talent crunch as market downturn continues

Hiring

Financial advisor John Bovard, owner of Incline Wealth Advisors, said hiring talent has become a headache lately. 

To fill empty positions, the Cincinnati-based firm started to broaden the scope of acceptable qualifications from those with traditional finance backgrounds to a larger pool, including young applicants who were business majors in college or who pursued degrees in related fields, such as marketing.

Bovard is not alone in an industry hard-pressed for skilled financial advisors. On average, financial advisory firms have three current open positions as the war for talent continues during the Great Resignation, according to new data from Ameriprise Financial, which surveyed more than 260 advisors. Financial advisors are also worried about other challenges, including the current investing environment, acquiring new clients and navigating through the pandemic, according to the survey. 

“The talent crunch in the last few years has become increasingly difficult not just because of the labor shortage in the country, but the number of people in the country that have good technical skills in the industry is very small compared to the actual number of firms that need them,” said Doug Fritz, co-founder and CEO of F2 Strategy, an industry consultancy.

Fritz noted that the talent shortage is most pressing in technology areas within advisory firms, which has seen robust growth in recent years. 

A survey by his firm found that 78% of financial advisory firms plan to increase their tech resources in the next two years, on top of 84% of the firms who have increased their resources over the past two years.

Despite the overall interest in wealthtech, many advisors are not investing enough in building up their tech resources, especially as the the current market downturn eats away revenues and many firms generally see tech investment as an expense, according to Fritz.

Only about 15% of RIAs with billions in assets under management have chief technology officers who collect average salaries of $350,000 to $750,000 a year, plus 20% to 30% of recruitment fees, making the roles expensive for the firms, according to Fritz. 

“Technology talent is finite, and wealth management firms are competing for the same people,” Fritz said. “When attracting tech talent, firms need to understand they are not only being compared to other firms in the industry, but to companies in every industry.” 

Within the wealth management industry, people tend to quit their jobs for more competitive compensation packages, better career advancement and more flexible remote work policies, according to the F2 strategy survey. 

“On top of the compensation problem, we also have a reputational problem because we look old and stodgy,” Fritz said, “If you're a really good technologist, the chances that you will go join LPL or Northern Trust versus Google or Amazon or Facebook or some startup like a unicorn company is pretty small.”

Some wirehouses are taking actions to boost retention and stop more than a year of advisor bleed. Wells Fargo launched a simpler compensation plan that eliminated three of four hurdles for determining the base payout rate for monthly revenue for its Private Client Group. The new plan also drops a penalty on certain referrals received by bank-based brokers and boosts some possible deferred compensation incentives. Other actions include loan and E-Trade incentives being added to Morgan Stanley’s grid, and Merrill making two adjustments in an effort to support advisors who remain with the wirehouse as others leave. 

And others are trying to boost their investments in tech. Last November, Mercer Advisors hired its first CTO, Christine Cataldo, a former Edelman Financial Engines executive with over a decade of experience in using technology to help fuel the company’s growth. At Mercer, Cataldo oversees technological and digital efforts as a member of the firm’s senior leadership team.

Apart from acquiring better tech talent, Fritz said good marketing is helpful to make advisors stand out amid the recession. 

“A lot of times clients begin with Google search, asking friends about what they're doing or looking at social media such as LinkedIn to learn about the market and intelligence,” he said, “And a lot of that is from firms that have put money into digital marketing and getting content and message out there.”

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Practice and client management Wirehouse advisors Recruiting Fintech
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