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Written by: Michael Nathanson | Focus Financial Partners
The advisory industry is approaching an important challenge ahead, and firms aspiring to endure into the future must be prepared to meet that challenge. According to the latest Cerulli Associates U.S. Advisor Metrics Report, over the next decade, 105,887 advisors plan to retire, representing 37.4% of industry headcount and 41.4% of total assets.
Along similar lines, in its recent report, The Looming Advisor Shortage in US Wealth Management, McKinsey & Company estimates that by 2034, the advisor workforce will decline to the point where we face a shortage of roughly 100,000 advisors. Making matters even more urgent, the Cerulli report reveals that more than one-quarter (26%) of advisors expecting to retire in the next decade lack a clear succession plan.
Some advisory practices and businesses will wait to address this dynamic until they are forced to do so. Some will wait too long, possibly with adverse impacts on clients, team members, and other stakeholders. But what are the solutions for firms that seek to be enduring enterprises and are not willing to wait? Here are six steps they can take right now, along with a look at some of the ways Focus is acting to attract, develop, engage, and retain the top talent in the industry.
1. Embracing Purpose and Connection
People must be paid fairly and see compelling career opportunities for them to want to join a company. As for why they stay, however, they stay for purpose and connection (assuming all other basic conditions are satisfied). Firms will increasingly need to embrace this reality if they are to succeed in the future.
At Focus, we consider our vision and mission – together, our purpose – whenever we make decisions. More importantly, we know that our purpose must support the individual sense of purpose that each of our team members feels, so we encourage everyone to consider and live their own purpose within the context of our company’s broader purpose.
As for connection, we understand the importance of our culture in keeping us together, so we talk about and work on it constantly. We also know that our shared values, outlined below, underly our culture, so we are clear about living by them daily.
Vision: We will be the leading fiduciary advice company in the industry. Clients will experience a company built just for them, and their advisors will be equipped with the capabilities and resources typically offered only by the largest institutions in the world
Mission: To focus the collective energy and capabilities of leading financial professionals to build a better future for clients, our communities, and the world we live in
Values: We are resourceful as thinkers, responsive at heart to the needs of our clients, team members, and communities, and imaginative in spirit in the solutions we deliver
- Service – Clients' success is our success
- Teamwork – We value every individual but also value super-teams before superstars
- Excellence – We are committed to high standards in what we do for clients and our firms
- Integrity – We strive to do the right thing, and we do what we say we will do
- Execution – We have a bias to action
Each of us has these words on our desk. Our conference rooms have them too and are named after our values. To us, they are more than words. They are an agreement that guides us and keeps us together.
2. Building an Employment Brand
Advisory firms will need to catch up with other industries that already have embraced the power of employment branding. At Focus, we’re proud of our recently evolved brand, but we understand that our brand means different things to clients, industry peers and partners, and team members. We want our employment brand to reflect what it means to be one of our team members. Part of that is incorporating our vision, mission, and values, but part of it is our value proposition for team members. This includes doing meaningful work, having clear career paths and opportunities for advancement, learning and development, equity ownership, attractive compensation and benefits, and yes, lifestyle and work-life balance too.
3. Investing in Our People
As the market for top talent tightens, firms will need to invest more in their team members. At Focus, we are investing in learning and development (including offering stipends and economic rewards for achieving certain professional credentials), as well as programs, platforms, technology, AI, and other tools to support and better facilitate our team members’ work.
4. Investing in Top HR Professionals
Investing in people also means investing in dedicated human resources professionals. A dedicated HR team brings the kind of perspective, experience, and expertise necessary to compete for talent in the long term. At Focus, we not only have a dedicated Chief Human Resources Officer but also a Head of Total Rewards, Head of Talent Acquisition, HR leaders throughout our businesses, and other leading HR professionals. For us, these valued professionals are not “overhead.” They are critical to preserving, building upon, and optimizing our most valued asset: our people.
5. Engaging in Regular Communications
As people increasingly move around in search of a company where they can make their career, I hear a constant theme: people want to be at a company that communicates regularly, transparently, honestly, and with integrity. At Focus, we communicate at all levels as frequently as possible, and we do so with what we call radical candor. We have established what some of us call a meeting “pulse,” a concept we borrowed from the book Traction. We host regular town hall discussions, always leaving time for questions and comments; we promote a regular performance review process, often calling for multiple reviews per year; and we circulate and respond to surveys on just about everything we can.
6. Embracing Equity Sharing
Successful advisory teams will also need to find better ways to utilize equity ownership to attract, align, and retain key talent. At Focus, we have increased the percentage of our equity owned by our team members 15-fold since we were taken private in 2023. We offer regular opportunities for key team members to acquire equity, and we have equity-incentive structures in place to ensure we can equitize our next generation of leaders and offer performance incentives for those who earn them.
Ultimately, the solution for a shrinking pool of advisory talent will need to come not only from individual industry participants but also from the entire industry working in concert. In the meantime, prudent firms on the path to enterprise will not wait. They will act now.
Related: Who Are We Building the Next Generation Wealth Management Firms For?
This article originally ran in Practice to Enterprise, a newsletter by Focus Financial Partners CEO Michael Nathanson. To subscribe, please visit https://www.linkedin.com/newsletters/practice-to-enterprise-7250140100670423045/.