The financial services industry is at a tipping point. The industry is challenged with legislative changes proposed by the Department of Labor which can impact products, pricing and how advisors do business in the retirement space. Technology continues to evolve faster than compliance surveillance systems can fathom and falling behind in this area can cause a company to lose market share with millennials. The shift from the nuclear family to a modern family structure of divorced parents getting remarried, unmarried couples and same sex couples living together also creates new financial complexities in planning and solutions offered to clients. All these changes offer opportunity for financial services companies willing to refocus their long term thinking on how they will better serve these changes and rethink their current talent. Having a diverse workforce of women and millennials will position the industry to weather all these changes.
The industry is not quite prepared for this evolution. The average financial advisor is 56 years old, white and male. Studies show that we are likely losing opportunities to attract millennial clients since they tend to buy from advisors that are within a five year range of their age. Women represent 52% of the population and are an important economic group when broken up into subcategories such as divorced, widowed and women entrepreneurs, all with different financial needs and concerns. With a non-diverse workforce, why are firms not reacting to these facts and making the necessary changes to their talent? In my observation it comes down to two main concerns; chasing short term results and not having a proven system for attracting and retaining women and young advisors. Many firms and advisors focus on short term results because of the need to deliver positive growth to shareholders and the financial advisor compensation structure. Currently, the low hanging fruit is the baby boomer market, the largest and wealthiest population. Financial services companies should focus on the long term opportunities the business is facing with women and millennials. By starting today they will be in a position of strength for the future.
The industry is due for an overhaul on how we attract new talent and how we prospect for new clients. Millennials have different motivational drivers than prior generations. They are attracted to companies and businesses that have strong values, cultures and provide a civic service such as volunteer opportunities. It’s not that this generation is not motivated by money; they just seek to feel like they are making a difference. Financial services firms must deliver a value proposition that highlights and delivers the benefits of having a flexible work schedule and the firm’s value proposition incorporating their community involvement.
For women, the financial services recruiting process usually discourages them from entertaining the career because they fear commissions, long hours and the tedious job of building a book of business through personal contacts. Women are scared they will not have flexibility and work life balance. In addition, building a book of business and approaching friends and family can be intimidating to some women especially when they lack the confidence and knowledge that they are doing the right thing and risk straining relationships.
The solution is in the hiring process. Managers are still recruiting to an antiquated system that is not sustainable. Cold calling has become increasingly challenging with the use of cell phones versus landlines, do not call lists prohibiting unsolicited calls, and caller id’s creating a screening process for prospects. In addition, the business has evolved into relationship building, networking, and referral based practice. Due to the complexity of products and solutions focusing on one or two target markets is more effective and sustainable for building a healthy practice where the advisor can trade her jack of all trades hat for a more specialized approach. As it relates to long hours, the business is entrepreneurial, in other words, you get what you put in; it is not measured by the number of hours you are in the office but more on the discipline of doing the daily activities that will generate clients and results based on working smart and efficient. Women also may find this business rewarding and the entrepreneurial aspect exciting in controlling both income and flexibility. Women can use their interpersonal skills to develop networks and provide a service model to clients that will make them more referable.
Millennials have been growing up in a world that teaches interdependence, by encouraging teamwork and valuing individualism. This offers a great opportunity to attract women and young adults to advisor teaming, the future of the business is to work with a team of advisors offering various specializations and honing in on each of their unique abilities. This model is similar to a medical practice or law firm, allowing for the change of crash and burn hiring to a more supportive and nurturing learning environment. Millennials and women can benefit from this approach which also can provide mentoring opportunities through the team or formal mentoring through industry associations or their respective firms.
The change starts both top down and bottom up. Local firm leaders need to start with awareness, and then take action. Firms need to complete a self-evaluation of their leadership team and firm ranging from their environment, value proposition, hiring questionnaires, and training process and local support. Firms need to revamp the revolving door and change it to a glass door that is transparent and friendly. The change has to start with leadership by realizing that the true success of their firms does not come from hiring people that look like them but hiring people that are opposite of them, bringing diversity of thought and approach to the business. The growth has to start from the inside out for the leaders of the financial services industry and with this shift; we will see the financial services industry evolve to offering services to our future generations.
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