The talent shortage in the financial services industry may not be a complete surprise, but the numbers illustrate just how hard hit wealth and asset managers could be.
Despite a “wealth boom“, a lack of talent may hold back organizations from fully capitalizing on the opportunities to be had.
There are reasons for the talent shortfall, and there are ways to deal with the situation.
5 Stats That Explain the Talent Shortage in the Financial Services Industry
1. The US unemployment rate fell to 3.7%, a near 50-year low
The New York Times reported the unemployment rate fell to 3.7% as the US economy added 250,000 jobs in October.
“What’s so impressive to me is there have been more jobs than workers every month since March of this year,” said Scott Clemons, chief investment strategist at Brown Brothers Harriman.
2. An estimated shortfall of 200,000 financial advisors by 2022
Moss Adams made this prediction, and such a forecast is not unreasonable considering the average age of wealth advisors is 51, and 43% are over the age of 55, according to Cerulli Associates. Retirement is on the horizon for many.
Meanwhile, just 10% of wealth managers are under the age of 35.
3. 72% of financial services CEOs see limited availability of skills as a threat to growth
The findings from this PwC report highlight the above concerns of a talent shortage, magnified in a strong jobs market.
The speed at which technology and customer demands are changing requires new skill sets that employees may lack, but that’s not the only challenge.
PwC also stated that these CEOs were asked how hard it is to recruit people with particular skills or characteristics, and they ranked emotional intelligence, creativity and innovation alongside leadership as the most difficult.
4. There are 12,578 SEC-registered advisories in 2018, up 3.3% from the previous year
The Investment Advisers Association reported the increase in firms, and they also stated that total registered assets under management are at $82.5 trillion, up 16.7% from $70.7 trillion the year before.
An increase in firms shows it pays to be in the financial services industry, but with a growing number of companies and limited labor pool, there may be a price to pay to attract the best talent in the financial industry.
5. 44% of RIAs are doing nothing to build up their talent pipeline
A TD Ameritrade study pointed out how 44% of firms aren’t doing anything to build up their pipeline, despite a Bureau of Labor Statistics prediction that the number of jobs in the profession will grow 15% in 8 years.
What Should Investment Management Firms Do?
Talent shortages may affect the industry, but it doesn’t mean firms can’t do anything to protect themselves.
Budgets, time, and in-house skills are available (and limited) to varying degrees, so firms should decide what makes sense for them:
- Offer higher compensation
- Establish or improve your training program; develop skills in-house
- Step up recruitment efforts
- Promote work-life balance; reduce employee turnover
- Adopt new and better asset and wealth management technology
- Make use of RPA (robotics process automation); automate routine functions.
- Outsource middle- and back-office activities to a fund administrator (reconciliation reporting, corporate actions processing, cost basis entry, etc.)
If you fail to plan, you are planning to fail, as Benjamin Franklin said.
The warning signs of talent shortfalls are there. Just don’t wait until it’s too late.
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