The global workforce has seen major changes over the past few years, and the financial services industry is no exception. The Great Resignation is a reality for every firm and can’t be ignored. And the changes firms are experiencing now will only increase going forward.
Managing a changing and departing workforce can make or break a firm. Maintaining stability creates a strong experience for advisors, and clients and sets the firm up for long-term success.
This Decade Will Bring Big Changes
The combination of an aging workforce and the Great Resignation has already led to significant changes for many firms, and those changes will continue over the coming years. Fueled by shifting priorities, burnout, and lifestyle changes, employees across all industries — not just finance — are joining the Great Resignation as they leave their jobs and move to different career paths. In November 2021, a record 4.5 million Americans voluntarily quit their jobs, breaking the record set just two months earlier.
Another change facing the financial services industry is the impending retirement of more than one-third of its advisors. About 37% of today’s advisors are expected to retire over the next decade. The average age of financial advisors is around 55 years old, with 20% of advisors aged 65 or older. In addition, the industry seems to be getting older faster than it is getting younger. There are more financial planners older than 70 than younger than 30.
With advisors making career changes and moving towards retirement in droves and up-and-coming advisors far and few between, firms face the perfect storm of challenges to manage the workload and provide consistently strong service to clients.
Establish a Succession Plan
Even with advisors retiring and quitting, the need for wealth management and financial planning continues. One survey found that 73% of financial advisors don’t have a formal succession plan — including almost one-quarter of advisors who plan to retire in the next decade.
A succession plan is crucial to facilitating a seamless transition of clients from a retiring advisor to another RIA. The most common roadblock for formalizing a succession plan is simply finding the right partner or successor.
Building a succession plan requires deciding who will take over the departing advisor’s clients. Firms should look for similarities, either in personality or specialty, so that clients have a bond with the new advisor.
Depending on the size of the firm, it can be helpful to have clients build relationships with at least one other advisor long before an advisor plans to leave. This protects both the firm and the clients against the worst-case scenario of the advisor leaving with no notice. Prepare the new advisors for their new clients with the right support, tools, and training to do their jobs well.
In many cases, the succession plan requires recruiting new advisors. Advisors increasingly value a competitive salary, robust benefits, flexibility, and a strong culture and purpose. Hiring younger financial advisors can prepare the firm as Millennials and Gen Xers become powerful wealth holders over the next decade.
Creating a Consistent Client Experience
Clients tend to build strong relationships with their advisors, so moving to another advisor can be disruptive. Many clients may use their advisor’s retirement as a reason to leave the firm. Creating a consistently high-quality experience for clients can help them stick with the firm during the transition.
As the departing advisor prepares to leave, they should introduce the clients to the new advisor and transition the work to their replacement. The new advisor can then present their financial philosophy, and get to know the clients to ensure the relationship is a good fit. Even within the same firm, transitioning to a new advisor can be difficult for clients, so it is essential that the advisor quickly establishes trust and confirms that the level of service will remain the same.
Using an integrated document management system ensures a smooth transfer of all paperwork, and allows the new advisor to seamlessly step into the role. Instead of learning someone else’s filing system, the new advisor can simply access a client’s records through the cloud and have a clear picture of their history, preferences, and financial goals.
Changes to a firm’s workforce will only grow in the coming years. Creating a succession strategy and planning for transitions can help firms lead the industry in the future.
