Warning: This article might seem harsh – but I’m not one to talk about problems without a solution, so it’s part one of a series that will also include actionable solutions. Stick with me.
Leaders in the wealth management industry, we have gotten ourselves into quite the pickle. It appears there are simply not enough experienced people to fill all of the open positions firms need to fill.
As a coach, I hear it every day: “I want to hire someone with at least three years of experience,” and if they’re looking specifically for an advisor, they want one “with at least $20M AUM to bring over.” Positions are left open for a long time, and the shortage of experienced talent has driven the compensation requirements up significantly over the last couple of years.
And let’s not forget how incredibly homogenous our industry tends to be – especially in leadership and advisor roles. You may have heard this referred to as the dreaded “pipeline problem” in our industry.
Friends, I have something I need to tell you.
YOU are the pipeline problem. I am, too. WE’RE the pipeline problem.
It doesn’t have to be this way – there’s a huge pool of undiscovered talent we could be bringing into our industry and developing into incredible professionals. But we haven’t done a good job of hiring from outside of our industry and networks, investing in those people and creating a culture where everyone can be successful. Frankly, we’ve been lazy, kind of self-centered and a little bit greedy. (Ouch, right? It was painful for me to realize when I started doing my own self-reflection.) Let me explain.
‘Pipeline Problem’ #1: We’ve Been Lazy
As humans, we’re somewhat wired to find shortcuts and take the “easy” way – but most successful people I know would tell you that the “easy” way isn’t always the “best” way.
When we hire, it’s easiest to ask our networks, “Who do you know?” Way better than sifting through a pile of resumes that comes in from a job ad, right? As Sonya Dreizler writes in her article Five Steps to a Diverse Network, “While the system of relying on our networks may be easy it is also limiting.”
It’s limiting in a couple of ways, really. The first is that we tend to hire people who are already in the financial space and have experience – likely a former colleague or a former colleague of a current colleague. No “new talent” here. Second, since the majority of people in our industry have historically been white males, and most of us tend to have non-diverse networks, we hire people who are very much like us, excluding entire groups of people who could bring incredible talent to our industry.
We also like to require “industry experience” even if the role doesn’t really need it. Because who has the time to train someone new about the basics like what an IRA is, right? I get it: We’re busy and it feels overwhelming to teach the basics. It’s much easier and faster to just hire someone who has the knowledge and experience.
Making the “pipeline problem” worse, we don’t really invest the time and resources to develop the people on our team like we should. How many next-generation professionals are you mentoring? How are you investing in and supporting your team’s professional development? Do you take it upon yourself to teach them how to “think like a business owner” or expect them to magically wake up some morning with that knowledge?
Finally, those of us who host events, podcasts or run publications tend to go back to the same pool of people when we need an “expert.” It’s less work than doing the research to seek out new voices, and often we’re under pressure and deadlines that lead us to take the easy path.
Now, these things may not feel like a big deal to you, but when everyone is doing the same thing – hiring from their relatively small circle, requiring experience when it’s not really needed, not investing time in the next generation’s development and using the same experts – it compounds to create a big problem. We might work hard in our businesses, but our collective laziness when it comes to hiring, developing and promotion of talent is where the “pipeline problem” begins.
‘Pipeline Problem’ #2: We’ve Been Self-Centered
If I had a dollar for every time an advisor told me, “GET OFF MY LAWN!” – oops, I mean – “I didn’t get a salary when I started. I had to go out and find my own clients. This new advisor needs to do the same thing!” – I would be a really wealthy coach.
How do I say this nicely? The world has changed since you started in the business. We’ve got this thing called the “Do Not Call” list and caller ID now. And when you’re first getting started and have no clients yet, it’s a lot easier to pay your bills when you’re making 7% upfront commission than a 1% annual advisory fee. (Side note: I think it’s a GOOD THING that we’ve moved to fee-based advice! But it’s a hard model to make work without a base salary when you’re brand new with no clients.)
Yes, you worked hard when you first got into the business. I commend you for it, BUT things aren’t the same now. This collective belief that those behind us can and should take our path can make wealth management a really difficult industry to enter if you’re a career changer or don’t come from a family with financial resources to support you early on.
Similarly, those of us who are white women who have experienced sexual harassment and discrimination throughout our careers need to stop telling young women that they need thicker skin. All of us need to stop centering ourselves as the “hero” and thinking the people we bring into our industry need to go through the same hardships we did.
It’s also natural for us to think we are the perfect archetype for our success in our industry. Have you ever been enamored with a job candidate who reminds you of a younger version of yourself? Yeah? That makes you, me and pretty much everyone else. It’s a form of implicit bias, and it leads to us hiring people who share a similar background – which, again, excludes entire groups of people. And implicit bias also creeps in when we choose who to promote and who we’re going to mentor (if anyone) – again, they tend to be people just like us!
The final way our egos get us in trouble (in this arena, anyway) is that we create or allow unhealthy, non-inclusive company cultures. It’s so easy for us to assume everyone thinks like we do, has the same values we do, has the same experiences we do. We create rules, procedures and company norms based on those things. Even if we DO hire someone without experience and who brings that incredible perspective and talent, we end up pushing them out of the industry because they don’t feel like they belong here.
Look, we’re human: Some of this is natural, but it’s not a valid excuse.
‘Pipeline Problem’ #3: We’re Greedy (and a Little Fearful, Too)
The truth is, most of us are a little bit greedy in one way or another – we’d like to keep those profit margins as big as possible, often so that we can take home more for ourselves or end up with a bigger valuation.
We can be kind of stingy when it comes to team compensation or investing in our team’s professional development. If a job candidate asks for less than we’re willing to pay them, we’ll just pay them what they ask for. Someone on our team might be significantly underpaid compared to industry benchmarks – but we keep quiet about it. “Hey, if they’re fine with it, what’s the problem?”
Well, the problem is it’s not the right thing to do, and it perpetuates the gender and racial wage gaps we see today. Over time, that small amount compounds to be a huge amount of wealth lost, and lower lifetime earnings for those individuals. I’ll be the first person to tell you I’ve been guilty of some of this in the past, but I’ve decided to change my thinking, and you can, too. Amazing people are eventually going to leave the industry (or our firm) because they realize it’s not an equitable industry, and we’re the ones who lose out.
Second, be honest – if you had to choose between taking on one more client or spending time mentoring someone on your team, what’s it going to be? I can hear the rationalization now – “If I take on one more client, I can pay my team more.” While that’s a nice sentiment, I promise that your investment of time in mentoring your team member NOW will pay off for them even more in future earnings than the small amount of additional salary or incentive from the fees of one new client. We need to prioritize the time it takes to develop our team.
Finally, many of us want to keep 100% of the equity in our firms and don’t allow our teams to participate in the incredible wealth that can be created through ownership of a business. If you own your firm, you realize what a big part of your personal balance sheet that business equity is. It’s likely a big part of your retirement plan, too.
Imagine the kind of impact we could make by sharing even small amounts of equity in our business. Extremely capable people aren’t going to be attracted to or stay in industries where they don’t have a chance at participating in wealth creation through equity ownership. (By the way, if your response is that those people should start their own businesses, I have bad news for you – if every talented individual did that, you wouldn’t have any talented people working for you, which you kind of need to build a good business, right?)
I understand that you need to run a profitable business – the old saying goes “no margin, no mission” – but we might be a little greedy at times. And we need to do better.
Now, maybe you say you’re not being selfish or greedy – you’re just being cautious, risk-averse or a responsible business owner/leader. I get it. It can be scary to think of increasing compensation so that someone new to our firm or industry is making $80,000 when our comfort zone and risk tolerance level is more along the lines of paying a base salary of $40,000. It can be uncomfortable to think about sharing equity in a business you’ve built over the years.
I would never recommend that you do something reckless without first running the numbers and being relatively sure you can make it work. But if we’re not willing to take even a small risk, we can’t expect others to do so, either. And they are definitely taking a risk if they are changing careers or – really, this is anyone – sharing their time and talents with us without any guarantee of future employment, fulfillment or career advancement. What we all need to do is tap into our abundance mindset and be willing to invest more in others.
Here’s Some Aloe Vera for Those Burns
OK, all of that might seem harsh, but as I said, stick with me. Most of the people I talk to genuinely want to make this industry a better one, and they’re willing to put in the work if they know what to do. If you’ve made it this far without sending me hate mail, my guess is you are one of those people. We’ve gotten into a rut of doing things the way they’ve always been done.
Let’s take a step back. We know there are plenty of people who need competent financial advice. I want you to picture for a moment what our industry could look like – a forward-thinking, thriving industry and profession.
What if we were one of the most trusted professions on the consumer trust survey? What if our industry was seen as robust and diverse and welcoming with solutions for everyone who needed help? What if we were widely known as an industry with some of the best, most rewarding, most fulfilling careers? What if, as a firm leader, you always had incredible and diverse talent in your pipeline? There is so much potential for our industry. It could be amazing.
Together, we’re going to fix the so-called “pipeline problem” that we’ve created. I’ve put together a series on what we’re going to do about it – including ideas on how to hire, compensate and train people from outside of the industry, how to develop emerging talent and how to build a culture that makes everyone feel welcome. Stay tuned.