New data by Arizent’s Research Team, sponsored by ServiceNow, on workforce needs in the industry.
Transcription:
Kerry Gross: (00:06)
Hi everybody. I'm so excited to be back on the stage here and now I'm with John Almeda, I'm still the director of research intelligence at Arizent. Arizent still owns Financial Planning and Invest, but so one of the things that I do in my job is I develop research projects to help audience communities, which includes you all, really understand some of the biggest issues facing, financial advisory firms today, obviously that tech spending is a big piece, but another piece that we are really interested in is the war for talent, and really understanding how it's impacting financial advisory firms, and with me today as John Almeida, he's the global head of wealth management and ServiceNow. He's responsible for addressing the challenges and trends of the wealth and asset management industry, very focused on client facing initiatives for front back and mid-office consolidation and productivity using ServiceNow as the platform for automation, efficiency and connectivity. John has over 13 years of experience in the financial services space, and previously he led Salesforce dot com's financial services cloud, go to market strategy. John, welcome to the stage with me. I'm so glad to be here with you.
John Almeida: (01:15)
Thanks. It's a privilege to be here as well. And thank you all for staying. I know it's a Friday afternoon but, I appreciate you being here, I've been with service now for about two years, as Kerry mentioned, and prior to Salesforce, I come from the wealth and asset management business. Having worked at fidelity investments for about eight years of my life. So privilege to be here.
Kerry Gross: (01:37)
So glad, to have you here, and as I mentioned before this piece of research that we're doing is the war for talent. And so this was a piece of research we did across all seven of the communities that Arizent services, but in particular thinking just about the wealth managers, we had 102 wealth management leaders. We surveyed, 40% earn the C-suite role and 77% earn a director role or higher. So really we're talking about leaders in these advisory firms, and all of these folks are either leaders of leaders or leaders of individual contributors. So we have folks who are sitting in manager roles, or higher than that. We don't have any individual contributors. And our goal in this research is really to understand what's happening from a people management perspective in financial advisory firms. What are the struggles that folks are having in attracting and retaining talent, and more importantly, what are the sorts of things we can think about to solve that? What are the big gaps we're seeing industrywide and so taken as a whole, these experiences really reflect the breadth of experience across the wealth management industry. As you see here we have folks across all different types of roles and really sheds the light on the impact of the war for talent. And so what we see happening at a really high level, we wanted to understand what the size of challenge folks are having with each of these strings. And what we see as in wealth management, as with all the other industries we served attracting key talent is a high impact and very common challenge for more than two thirds of firms, and more than half of wealth managers also say they're challenged by maintaining a large enough workforce to do the work and retaining key talent. And John, I know we've been talking even before this session, there are really some specific demographic reasons why this talent squeeze is happening in wealth management. What are you seeing when you look out in the market?
John Almeida: (03:26)
Yeah. So in my role, I have the privilege of speaking to wealth managers throughout the world, almost on a daily basis. That's part of my job. I've been doing that for the last number of years. So it is really a privilege to listen to them and kind of try to, coagulate all the different, challenges that we're seeing in the market and the harsh reality of the market that we're in right now is that the average age of a financial advisor right now is 55 years of age. One third of them are over the age of 65. So they're on the back nine, as I kind of like to say, and a third of them plan on retiring by, the year 2029, which is about 120,000 advisors. So every day I read in publications that come out, including financial planning.com, all these MNA, right? So and so, gobbled up this IRA with X amount of billions of dollars of assets under management. So the wirehouses have started to beef up even more so than ever before they're recruiting efforts. And right now across any industry, financial services are not the role of the financial advisor is the second hardest job to fill. And all this was before the great resignation. So the great resignation has accelerated that. So every firm right now is trying to figure out how do I differentiate myself, not just to an aging population, but to an aging population of financial advisors that won't be around in another five or six years. So what we're really seeing carry is that nearly half of the loss of talent within wealth management firms are client facing roles that affect the client experience, 25% of which in the back office or middle of back office, which I'll talk about in a minute and only 23 is really directly front office. So, when you put that together, it's obviously that's 48 by, by my math. So, you guys actually just published an article a few weeks ago called financial advisors faced with talent crunch as market downturn continues. Don't know if you wrote that, but I read it and it said that they're now expanding beyond the traditional qualifications to folks who have business and marketing degrees and trying to make that adaptation, right. And, the talent shortage. Isn't just limited to financial advisors. There's a huge tech shortage as well should come as no surprise, all this great tech that we've heard about over the last few days. And we see out in the expo, the folks to support that are in a short supply. So, everyone's looking at how to recruit these folks. And, the reality is that your article literally said this, and I quote, the industry from a tech perspective, looks old and stodgy. So, the firms that get it are the ones that are investing more and more in technology as they're differentiated to run their business and automating as much as they can. The ones that don't are gonna fall behind, obviously. And to attract that talent does any, tech individual graduating from college today, look at working for a wealth management shop as being cutting edge. So you're not just in competition with financial services anymore. You're in competition with the Amazon's and Google's and Facebook's of the world who don't look old and stodgy. So how do you combat that? And I just, saw some research as whether we participated in with IDC that said global financial institution's top it spending priority is now task and process automation. Why? Because throwing bodies at the problem is no longer the answer that is not the answer you have to automate, and you gotta give folks the opportunity to work on higher value tasks and automate the mundane.
Kerry Gross: (07:19)
Definitely, and thinking about that tight labor market across all the different types of roles that folks have in a financial advisory, job. But what we asked, why are you having trouble attracting talent, right? Thinking about, we know from all the anecdote that John was just saying, and from other demographic shifts that we understand that it is hard to hire folks into the wealth management space. And we really wanted to understand why. And what we see is that, the most common reason, 35 folks said that looking for employees with highly specific skills that are in short supply is a top reason, and I'm curious, John, what do you see as lessons from this tight competition for all sorts of roles? What are some innovative things that you're seeing happening to recruit financial advisors or other roles or to backfill in this need?
John Almeida: (08:08)
So there's a finite level of talent, right? It's not infinite. So what I am seeing the good news is what I am seeing is that you're seeing some firms, some of the bigger firms getting creative on how they nurture these skills. And a lot of them are starting to nurture it from within a lot of the talent is right under your noses. And, you don't even realize it's there. For example, Morgan Stanley launched a program two years ago in 2020, right at the height of COVID called the virtual engagement associates for broker trainees. So VEA and the, the associates initially help with things like client onboarding to social media posts, setting up new technology while they also pursue their basic securities licenses over the course of around 18 months. And then from there, they can stay in the program. They can go entertain other roles or join Morgan Stanley's formal 40 month financial advisor associate training program. And the results have been staggering executives have said, it's proven to be more successful than any industry average. They say it's a very good funnel. And they also say that the VEA staffers are also very highly diverse in terms of gender, race, and ethnicity. So we can't forget about that as well in attracting folks that you normally wouldn't think to attract into the talent pool as well, Bank of America, Merrill Lynch, are thinking about it the same way they now hire the vast majority of their broker candidates from their parent company bank of America on the, retail banking side. Right. And what they say is that their average broker training program is only 18 months and that's the graduation rate, by the way, industrywide is extremely low when it comes to broker training and all the exams and everything that they gotta get through to become certified to provide us advice. It's only industry wide at 30% Merrill has their graduation rate at 80% because of these incubation programs, because they have exposure to bonafide financial advisors who can mentor them and two to them. So again, you gotta supplement your recruiting efforts and also nurture those skills from within and use technology as a differentiator to make these folks stay engaged and provide 'em clear career paths from some of the mundane happening in the middle and back office to potentially being in front office roles, which are more client engaging.
Kerry Gross: (10:40)
And that's a great segue John, into understanding, we talked about early on about the types of roles that people are seeing folks leave, and we asked folks where do you see higher rates of attrition in any particular roles? This is multi-select. And people could say, if they saw higher, rates of attrition, what we see is that 37% of financial advisors say they're seeing higher rates of attrition among employees in the back office compared to other roles. And 34% say those in front frontline or front office, individual contributor roles. And, John, this just comes back to thinking about that experience in these roles, right. You just said, making sure that there's a forward pipeline, what else do you see? what's the challenge in losing back office staff in particular,
John Almeida: (11:28)
To me, it's the argument and I'm not sure if this is a popular comment or not, I'll let you decide, but it's the argument made that the folks in the middle and back office are indeed the glue of the entire firm. And, we've spent two days with all due respect, talking about how to make financial advisors that much more efficient and effective, so they can spend more time where it matters with their clients and unburden their administrative tasks, right? Not suggesting that's not important, but we also have to look at what we at service now like to affectionately call the messy middle, the forgotten middle and back office, where frankly, 70 to 75% of the work really gets done. And where is their command central? Where is their one stop shopping for being effective and efficient in supporting the financial advisor? And the answer is it doesn't really get looked at as such because firms have an attitude that that's not quote unquote alpha generating, I would argue that it is. I spoke recently to one of the largest wealth managers on the planet, can't tell you who that is, but you can probably guess they they're massive. And in, and around their financial advisors, they have a support team team of folks that they call the CSA's, the customer service associates. Sometimes it's three to one ratio and financial advisors. And I got to sitting with them and doing a day in the life with them. And the one thing that this firm kept telling me over and over again, is that if you can solve for the CSA's in the middle and back office, who support and spend so much time with the financial advisors, you'll buy extension solve for the financial advisor, and then even further by extension solve for the client experience it's inefficient, it's manual. It's a cutting edge tool called Microsoft office in Microsoft Excel that they use to get their job done. That's a joke. One guy laughed. Thank you. you get a free tchotchke at the service now booth when you leave. but at the end of the day, that's really, what's it's about it's changing the attitude to say, don't forget about these folks who have to support the financial advisor, cuz they're doing a lot of the heavy lifting. One of 'em said to me, I hate the admin portion of my job. And I said to her, well, isn't your entire job admin. And she said, it was, and I said, well, then you hate your entire job and I'm not sure I should have said that. I hope she's still there, but at the end of the day, we can't forget about that messy middle cuz they do a lot of the heavy lifting and wouldn't you argue with me that say client onboarding, complaints, management, client updates, trading operations, money movements. If you did that more efficiently, if you saved time off of those functions and those operations isn't that inherently alpha generating, I would argue that it is.
Kerry Gross: (14:32)
And I think too John, the piece about, when you talk about the war for talent, everyone in this room and we led with this, the demographic shift that's happening in financial advisors. And I think the big picture piece that we learned from this research is how much tightness there is for back office talent because those talent jobs that they don't have certifications. They don't have to be in wealth management. They can take those admin skills in lots of other places. And so what we're seeing in the research and really trying to understand the prioritization, the value in, what they're actually doing, are they doing not just administrative tasks? Do they have alpha generating roles? And do they also have that forward line? Like where, where am I going in my job? Where am I going in my role? which is one of the things that we asked about, why are you losing talent? Not just, why are you having a hard time attracting, but why are you losing talent? What we see is compensation is too low as a top reason. This is a top reason across all industries. But what's really interesting to me is the things that are underneath that in particular lack of support when needed and then down at the bottom lack of advancement opportunities. And for folks, particularly in those back office roles, thinking about what is that drive for for advancement. And I know John, I'm curious, what are the things here that speak to you when it comes to top reasons that that firms are losing talent?
John Almeida: (15:50)
Yeah. I, the one that catches my attention, we have a monitor in front of us, by the way. So that's what I'm looking at is the lack of support when needed. I've seen article after article lately and especially accelerated by Covid where instantaneously by a flick of a switch, a financial advisor may have gone from working in an office to working at home to now, as we sit here today, not knowing where the heck they're gonna work from in the future. Is it home? Is it office? Is it hybrid? Is it in my car? I, don't know firms haven't really figured that out, but at the end of the day COVID certainly accelerated a spotlight on some firms that may have been laggards and ensuring that it doesn't matter where the financial advisor works from. Whether it's home a coffee shop or wherever they should have the tools that they need at their fingertips to do their jobs. I had again, I'm not at Liberty to tell you this who it is, but I had another extremely large bank. They're a bank inherently, but we all know that there's massive wealth divisions in banks tell me that their entire client onboarding team had to stay in the office. They could not work from home, even at the height of the pandemic. And I said, why? And they said, because 100% of our operations is paper based. Don't fall off your chairs. That's a true story. It's the year 2022. That's quite prevalent though. I'm not surprised by that anymore. I told you who I work for a very large firm. That's a fantastic firm, but a lot of their processes are paper based. So I just read an article. I'm gonna read you some quotes here from CNBC that just published this a few weeks ago, in terms of the lack of support advisors wanna work with firms that share their values and provide advanced tools and technology. Let me say that one more time. Advanced tools and technology to help them deliver an exceptional client experience. It becomes reputational for advisors, right? Regardless of where they're working, support and resources is the second priority for advisors considering a move. You hear about it all the time. Sure. Some of it is financial, but some of it, they get fed up with who they're affiliated with and not getting the support that they need. Why is it? And we've heard this before that a financial advisor only spends 19%. You guys are saying 20, I'm gonna be precise and say 19, cuz that's lower, with client facing activities, that's unacceptable in the year 2022. I rarely hear from my financial advisor, it's probably because I'm not ultra high net worth like you, Carrie, I know you, but at the end of the day, it's because they have such a heavy administrative burden and are chasing these menial tasks around between middle and back office, which is not automated. And it takes time away from them having to spend time with their clients. Obviously technology, plays a huge role in this, COVID has again accelerated that ability to meet clients and meet advisors and meet the middle and back office where they are. They shouldn't have to go to an office to do client onboarding because of a pandemic. You should have been prepared for that. So the question is, what's next? What's around the corner. Our firm's gonna still look at technology and go, it's an expense is the CTO of the firm looking at this going while technology is an expense or is the CTO forward thinking enough to say it's not an expense, it's an investment to make my firm that much more efficient, provide higher value tasks for the humans. So they're more satisfied. And then this tight labor market that despite the bear market, unemployment is still unbelievably low. So where are you gonna get the folks? So you gotta make sure that they're fulfilled in doing that. And I'll tell you one more story. If I may, one of the largest, wirehouses in the country, I spoke with them recently as well. They almost proudly, almost proudly told me that before our advisors are proficient, they have to learn 40, four, zero applications. Someone laughed, you get (19:59) key as well, 40. And they said that proudly like, Hey, let's see well, what you're doing is you're throwing too much technology at them, right? what you're doing is giving them what they don't need. Another system of record. Do you really need another with all due respect, CRM, you need another golds planning tool. You need another portfolio manager, they have all that, but you keep throwing it at them. What you don't have is a system of action, not a system of record to stitch all this stuff together. And that's what I find that is lacking. So you, you gotta make sure that you look at this from an advisor's perspective and provide them holistic solutions, whether it's in HR, whether it's in it or whether it's in their own support or their customer support, what we like to call customer service management. So it's something we're calling transforming the advisor life cycle, it's their business operations that non-client facing activity that you gotta be able to flip the narrative and say, someday, my advisors are gonna spend 60, 70% of their time facing with clients. That's what matters most. And the other 20% chasing trading and product and fees and commissions and questions. Why? Because we've solved for the home office that has to deal with this stuff. Auto assigning case, case management, case orchestration, work management, collaboration, and all that stuff to get them unburdened from their administrative tasks right now.
Kerry Gross: (21:31)
And, we have some data John that really speaks to that speaks to the advisor experience and what they, what they say they have and what they say they need. And so this question we asked what do you have as people manager? What kinds of support do you have? And these are the eight things where folks had, they had the least amount of support that dark purple is the percentage who says they have all the support I need. And if all, you just look at that chart, see that fewer than 30% say they have all the support they need in these line items. And we've, split them up into two different sections. And John, maybe you and I can go through each of these, first looking at the opportunities for advancement and thinking about where areas that wealth management could really improve the experience for employees when it thinks about the opportunities for advancement in growing and their roles growing in their job,
John Almeida: (22:20)
You know what all this tells me, all these nice colors and bars and whatnot. It, tells me that what I hear anecdotally from all these firms and I don't mean to make fun of this. I just caught myself, no, this just validates, very poignantly. What I hear anecdotally from customers, I talk to every day, which is because of COVID we haven't figured this stuff out yet. We just, haven't and COVID has certainly accelerated the need to figure this stuff out. Cause again, we don't know what's around the corner, but the two that really pop from me are career advancement opportunities. I already talked about that. The glue that holds it all together in the middle and back office, where the lot of the heavy lifting has gone on. Have you, done a look inward out to say we're gonna put programs in place to put clear career paths in place and incubate those programs. Like I mentioned earlier, a Morgan Stanley, a bank of America Merrill Lynch is doing to kind of mitigate the challenges of attracting new talent. That's a big one that should be looked at, are you putting the technology, which says right there, technology that provides a consistent employee experience. For example, only 12% are leveraging technology. For example, to streamline the onboarding of new hires, 12%, 88% throw 'em in a cube or an office, and maybe a month later, they get their laptop, that happened to me actually. I wasn't even sure it was like that movie office space. I wasn't sure with my red stapler, if anyone knew, I actually worked here until, we take that for granted, but that's important. First impressions are everything. Do you want someone looking at this and going, this is a bleep show two months into my employment or no, this is pretty efficient. And I enjoy working for this company. This company's got their stuff together. So that's just one example. Technology should be leveraged of obviously across all these parameters, but career advancement is one technology is, the other one. But I, think this is a symptom of a broader problem that I see, which is you talk a lot to these people leaders who have the biggest challenge right now, I would argue. And, not many only a quarter or less than a quarter say that they have all the support they need for business processes and to support employees. And that's how it has to be looked at technology is the enabler, right? Technology shouldn't be leading the conversation. It should be enabling the conversation. What are the business processes are those documented and how do you workflow those to make them more efficient across your enterprise holistically to break down, all these silos. How do you collaborate better? Are folks still working in Excel and outlook and Gmail that would argue that's not the efficient, it's not a workflow tool. Although a lot of my customers tell me it is it's not so, things are like that we had, and I am at Liberty of saying this, my former employer, fidelity investments, we just rolled out a big project with them that also involved the risk and compliance element of this, let's not forget that, right. There's no shortages of, auditors from the SEC and FINRA still looking to find us left and right, right. And, get the checkbook ready. So you gotta stay within the guardrails of continuous control monitoring, whether it's in your first, second or third line of defense, but, fidelity came to us and said, can you help with all this hiring stuff? And we did. We rolled out a portal for them to onboard clients. It was a cross-department onboarding portal and to, mitigate a risk failure that they had with a chairman's line, no one likes to call it what I'm gonna call it. But it's really the whistle blowing line, which is a compliance requirement these days. So, we rolled out that with them and they were able to onboard 9,000 new hires last year, they hired 9,000 people and they took it down in their estimate from several months to two to three weeks, just because of that efficient onboarding experience. So again, the younger generation that's coming into the marketplace that grew up with the, iPhone or the smartphone in the hand right out the gate is already getting a better experience with the likes of fidelity because they were onboarded that efficiently. And the anonymous case creation line for the chairman's line to be able to alert the powers that be at fidelity that something may not be copacetic. But the other thing is, and I hate to say it this way, but it's like monetizing the employee's time the faster you get them onboarded and more efficient in their jobs, the faster you're kind of monetizing their time. So they can be more productive for your firm.
Kerry Gross: (27:14)
And it's also a solution to the war for talent, right? If we are having tightness in hiring financial advisors, if we're gonna keep seeing, challenges and hiring folks in the back office and middle office staff, losing them to other roles, being more effective with technology is also a solution for that. Right.
John Almeida: (27:31)
For sure. Yeah, I would say you gotta deliver a unified experience for an employee from anywhere. Again, we look at it in three kind of buckets, if you will, it's the HR experience, it's their technology and IT experience, and then it's their work if you will, in customer or client experience. Right. And one would argue that the middle and back office, their client is the financial advisor. So the better you're effective in managing their request, the more effective they're they're gonna be, and don't forget about what we call the voice of the home office, right? The folks who actually have to orchestrate the cases and the case management and resolving this stuff, does it go to legal? Does it go to risk compliance? Where does it go? That stuff can be automated. That stuff should be automated. So folks aren't chasing that stuff around, we really feel that the firms that invest and spend the money where 70 to 75% of the work is done in the forgotten middle and back office are the ones who are gonna exceed. And that is not to suggest that you should not spend money with a financial advisor in the front office. Of course you should. But that's where most of the money has been spent anywhere today. The bottleneck that we're seeing, where it falls apart is that forgotten, messy middle that we like to refer it to.
Kerry Gross: (28:56)
Thanks, John, I think we're at about time or our clock that we also have down here says it's just about time. And I think there isn't a left slide to go to, but that's fine, what it was gonna say was visit john at booth, you can visit John. If you have questions.
John Almeida: (29:15)
You haven't given your notice yet. I thought you were not kidding. She's not giving her notice.
Kerry Gross: (29:21)
I'm not giving my notice, but if you have questions for me, if you have questions for John, feel free to find either of us after this. Or if you wanna talk to service now, I'm there at booth two 11. So thank you everyone. appreciate
John Almeida: (29:31)
All your, yeah. Thank you very much. Thank you all for coming.