David’s Articles

David has been writing and publishing since 2006.  

This post was written and published prior to September 2023 when David and his prior firm, Family Capital Strategy, merged with Greycourt.  Views expressed reflected David’s personal views at the time and do not necessarily reflect the views of Greycourt.  Posts and information may be out of date and should not be relied upon for investment advice.

Family Offices and Wealth Managers – Don’t Miss the Point on Hiring Challenges

Sep 12, 2022 | Family Wealth

selective focus photography cement
Photo by Rodolfo Quirós on Pexels.com

Given the labor shortages seem to be omnipresent, it is no surprise that the wealth advisory space is seeing similar challenges.  On a frequent basis, at least weekly, I hear of firms, both single and multi-family offices, that are looking to add talent.   Yet far less frequently do I receive resumes of people who are actively looking for a change.

It does not take an advanced degree in economics to see the supply / demand imbalance here (low supply of labor, high demand), and its likely effect on rising compensation levels in the industry.  At a macro level, there are several contributing factors at play – the retirement of the large generational cohort of Baby Boomers combined below average participation rates of mid-career professionals (a smaller generation X) create circumstances for an acute shortage in talent.

The tidal wave of wealth transfer combined with new fortunes created in technology, crypto-related fortunes, and even those who owned real estate portfolios has created new, meaningful pools of clients that will need wealth advisory support in the years ahead.  

Yet, the average age of a financial advisor in the US is in their mid-late 50s, with Cerulli Associates estimating that a third of the financial advisors in the US will retire over the next 10 years (by 2030).  Said differently, there is a growing number of new clients + existing clients that will need to be serviced by an industry that is facing an acute shortage of labor.

The situation is even more dire than it seems.

The reason for this is that the industry has a broken / flawed / dated understanding of how to cultivate talent.  Many of those retiring advisors came of age in a system that was predicated on sales ability.   As a former business partner of mine liked to remark, these were called brokers originally, who rebranded as financial advisors because clients did not like the feeling of being sold too.

Regardless, the path into the industry for a generation or more, was the basic wire-house approach of 2 years to get to $20MM in assets under management.  Borrowing a proverbial wealthy uncle, this mad sprint required cold calling, mass mailings offering a free steak dinner (I actually got one of these earlier this spring), etc.  

Those who made it were able to build a career and life that was great.  An $80MM or $100MM book of business at 1% fee, less an assistant and some overhead to the firm, led to attractive advisors’ incomes.  The proverbial Dentist hours, dentist money, but no dental school – not a bad trade.

The industry responded to this and flourished – now with over 300,000 financial advisors in the US spread across individual practices within larger firms or for the entrepreneurially minded, many left and started their own practices.  Today there are an estimated 14,000 registered investment advisors in the United States. But the key characteristic of this cohort, in general, was sales ability – not advice giving per se. 

More recently, there has been a different cohort that has landed in the wealth advisory space.  In a world of growing complexity, these new entrants to world were foremost attracted to the technical complexity of the work with wealthy families.  Whether lawyers or accountants, if you are bright and creative, the affairs of the ultra-wealthy can offer a lot of cognitive stimulation.

So, if the first wave of advisors were skilled in sales, this wave of advisors are the brainiacs.  And arguably, both skills are needed to serve clients.  Sales is just rhetoric with economic consequences.  A great advisor will need to be able to demonstrate and convince a client of a particular path to go down.   Similar, clients with complex needs will need sophisticated technical advice.

So how do these dynamics contribute to a shortage of labor?  

First, for those with sales backgrounds, the general view is that sales in the predominate skill required for success in the industry.  This is not an obstacle to some who ex ante would consider financial advice as a viable career path.  However, there are whole other groups of people who would not say they have an innate interest or talent in sales that might perfectly be suited for the core thrust of the job at this time – actual advice giving.

For those with more technical backgrounds, that technical barrier could be seen as a barrier to entry.   For those with non-quantitative backgrounds, the perception of the industry as being quantitatively heavy will be a deterrent.  For those with more generalist skills, they may not understand that technical capacity can be delivered in a team capacity, not necessarily at an individual contributor level.

The point being many individuals who would potentially make great financial advisors are self-selecting out of the industry before understanding the job and how they might be in fact a great fit.

For industry leaders, the opportunity is then to:

  • Consider the real determinates of role success and what skills can be trained vs. have to be hired for
  • Shift to generalist / specialist service models – When we go to the doctor, we see our primary care doc for some issues and the surgeon for others.  Not all advisors will need to be CFA Charterholders or have LLMs in tax, but the team in aggregate will need those skill sets.
  • Continue to recognize and support the growth of non-producer roles that are more focused on client service.   But do not forget that many of these non-producers may just need experience and practice in sales and could become producers over time.
  • Build true marketing expertise, not just the breakfast/lunch/cocktail/dinner circuit.  Part and parcel to point 3 is for advisory firms to build real marketing muscle
  • Get earlier in the talent pipeline – If your talent strategy is just to poach talent from other firms, unless you live in a market where people are moving too in large quantities, odds are you are   not going to be able to shake loose best talent or you are going to pay too much.  Both these options have a real cost – so you should weigh this cost against the cost of early career talent development.  This requires… 
  • Real HR practices and skill – We close this list where we began.  Hunches, feel, and likeability are unlikely to be the real determinates of success for your team.  Study organizations with robust talent identification and development practices and look to adapt.


Subscribe Today

Join 5,000 other followers of David's thinking and insights


Nashville, TN