BUSINESS MANAGEMENT
Eliza De Pardo
The Big Squeeze : Leading Through The Talent Crisis
It ’ s hard to find talent these days , and our biggest human capital challenge may still be ahead of us .
W
E ARE AN INDUSTRY FIXATED ON ASSETS . ASsets under management , net new assets , asset gathering , asset growth . Assets , assets , assets ! But have we inadvertently neglected the most valuable asset of all ?
An industry-wide talent deficit looms large . From coast to coast the squeeze is on as firms struggle to find skilled candidates with whom they can negotiate reasonable compensation .
With a scarcity of experienced talent , RIA firms will face longer lead times when recruiting . As a result , firm productivity and growth will be increasingly difficult to sustain .
Since there are fewer candidates , advisory firms will have to compromise . The normal experience and qualification requirements will likely have to be loosened . Candidates are exerting their bargaining power and negotiating higher rates of pay , and industry compensation benchmarks are proving to be less than helpful .
The impact of fewer candidates , longer recruitment lead times and higher compensation has already started to hit home for advisory firms across the U . S . The pendulum has swung in favor of talent .
We are , of course , still emerging from the throes of the Great Resignation . Talented people across the economy are in motion , seeking opportunities that offer greater flexibility , compensation and benefits .
The question is , to what extent has this pandemic phenomenon affected the advice industry ? According to data from the Bureau of Labor Statistics , pandemic resignations may not be all that easy to explain away .
In August 2021 , the U . S . all-sector “ quit rate ” reached 2.9 %, an all-time high since the data was first collected in 2000 . Driving this result , unsurprisingly , was the leisure and hospitality industry with a whopping 6.4 % quit rate . Heavens , who could blame them ?
At the same time , the U . S . financial sector quit rate was just 1.3 %, down from 1.8 % in October 2019 . But we ’ ve seen worse : For historical context , the quit rates were worse during both the dot-com bubble and the global financial crisis .
In short , the Great Resignation is not the leading contributor to the industry ’ s talent shortage . Macro trends indicate the issue is far bigger than we have contemplated . This is not a pandemic issue , or just a U . S . issue . This is a global experience .
The consulting firm Korn Ferry has embarked on multiyear research called “ Future of Work .” One of its reports , “ The Global Talent Crunch ,” predicts a global talent shortage of 85 million people that will lead to $ 8.5 trillion in unrealized annual revenue by 2030 . The U . S . financial services sector is expected to suffer the most . The lack of skilled talent is predicted to stunt growth by $ 436 billion ( as measured by projected unrealized economic output ).
It isn ’ t a shortage of people ; it ’ s a shortage of skills . There will not be enough skilled people with the experience and qualifications required for the positions needed . According to the research , the number of rapidly retiring boomers are a leading contributor to this problem .
Larger global trends move slowly and surreptitiously . The Great Resignation may be a mere warning flare drawing our attention to the horizon . The question for all businesses is : How can we increase access to this increasingly scarce asset ?
You could argue that robots and A . I . will reduce the demand for human assets , but the research suggests otherwise . According to another Korn Ferry report , “ The Very Human Future of Work ,” even giant digital age advancements won ’ t change the fact that the world ’ s most valuable asset is , in fact , human .
JULY / AUGUST 2022 | FINANCIAL ADVISOR MAGAZINE | 29