The millennials are disrupting the traditional ways of the financial services industry, which can negatively impact a firm’s financial situation in the long run.
Millennials’ attitudes, preferences, and demands are changing the way business is done, and as they become a larger share of the workforce, the advisories who don’t adapt will be left behind.
Still, this younger generation holds the keys to firms’ future success.
Why Millennial Workers Pose Challenges for the Financial Services Industry
Too Few Are Entering the Profession
According to Cerulli Associates, only 10% of wealth managers are under the age of 35, while the average age of a wealth advisor is 51. 38% of advisors are expecting to retire within the next 10 years.
Furthermore, Moss Adams predicts there will be a shortage of 200,000 financial advisors by 2022.
Competition for a smaller talent pool means offering higher salaries if companies wish to hire the best. The costs could be prohibitively expensive, and for firms that cannot get the desired candidates, they may have to settle for lesser talent or overwork their existing staff.
Industry’s Poor Reputation
One reason too few are entering the profession is because financial services as a whole has suffered from a bad image.
For many young people, their first experience learning about the industry came through the economic crisis in 2008-2009, where financial services-related news coverage focused heavily on crime and scandals.
As a result, if one’s exposure to the industry was through a negative lens, it may not be surprising if a young person doesn’t want to work in such an environment.
But what’s actually surprising is how many young people already working in the industry would rather not be there.
According to a PwC report, 21% of millennials employed in the financial services sector would rather not be in this line of work.
It’s one thing for someone to have a misperception of the investment industry, but it’s another when those in the industry want to leave it.
Less Loyalty to Employers
PwC found that only 10% of millennials currently working in the financial sector said that they planned to stay in their current role for the long term, compared to 18% across all other sectors.
For those working in financial services, 42% said they’re open to offers and 48% were actively looking for new opportunities.
Lower Levels of Engagement
According to Gallup, just 29% of millennials are engaged in their work, making them the least engaged generation in the workplace.
Lower employee engagement levels mean workers are more likely to leave their jobs, and it means higher costs.
Gallup reports that disengaged employees cost an organization $3,400 for every $10,000 spent on their salary. In other words, 34% paid on salary is a waste for the company.
Gallup also estimates that millennial turnover alone costs the U.S. economy $30.5 billion every year.
Yet Millennials Are Also a Solution
There is a lack of young investment managing talent, and of the young talent available, statistics have shown the millennials are less loyal to their employers and less engaged in their work.
But it doesn’t have to be that way.
Asset and wealth management companies can step up their game and get the youthful talent they need as long as they know where to look and how to get them.
These firms ultimately will do better when there is a competitive pool of applicants to choose from.
Recruit at Universities
Rising tuition and student loan debt levels are out of control. Students want to know they’ll have a good job to pay off their loans after graduation.
Enter financial services.
Educated people are there, so advisory firms should make their presence known at a college campus.
- Set up a booth at a careers fair
- Partner with the business school and professors to promote internships
- Host on-campus events… and offer free food. Students like free food!
Utilize Social Media and the Internet
If a wealth or asset management firm can’t have an on-campus presence, they should certainly have an online presence.
Expand recruitment efforts by using LinkedIn recruitment search tools. Post job ads on relevant sites that target the young and college-educated, finance and accounting demographic.
Cater to Millennial Values
Promising an attractive salary to graduates shouldn’t be an organization’s only selling point.
Millennials want meaning in their work, and they want to know that what they’re doing is helping others.
By focusing on how asset and wealth management services help clients reach their goals rather than focusing on what helps the company reach its own goals, employees will feel more engaged and connected to their employer.
There are other ways to attract the millennial workforce:
- Promoting work-life balance
- Being socially responsible
- Embracing diverse backgrounds and ideas
And if the work culture is bad, the stats show millennials already know where the exit door is.
Invest in Training
The new and young advisors need mentorship. Don’t expect them to come out of the gate with the knowledge it took someone 20 or 30 years in the industry to acquire.
Partnering a young advisor with a senior one for a period of time will be a great way for the younger one to learn how to properly research, analyze, invest, and interact with the clients.
If firms still have trouble attracting talent, they can outsource various functions, including their middle- and back-office operational tasks.
A fund administration outsourcing company can provide investment firms with the labor and infrastructure to ensure the reconciliation and performance reports are accurate. Furthermore, there may be cost savings.
Millennial Talent Can Make or Break the Financial Services Industry
Too few young people are joining the profession at a time when their numbers will be greatly needed down the road. It doesn’t help that their 2008-2009 financial crisis during their early adult years shaped their view of an entire industry.
And for those that are working as an advisor or portfolio manager, a sizable number are either disengaged, willing to leave their employer, and are open to leaving the profession altogether.
This may present a pessimistic outlook for the industry, but by improving recruiting methods, adapting to millennial values, and training them for the future, investment companies could attract a greater quality and quantity of talent.
Those firms, in turn, would be rewarded with competent employees who show higher engagement and loyalty the company.
Reaching out to the millennials is no longer just an option, it’s a necessity.
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