In Aristotle's treatise titled "On Longevity and Shortness of Life," he observed "it is not clear whether it is a single or diverse cause that makes some to be long-lived, others short-lived." Aristotle was referring to plants and animals but one could make the same observation about advisory firms. Some last a few short years and others evolve through multiple generations.
Now I don't claim to be an Aristotle aficionado, but I know the guy liked to stir the pot when it came to critical thinking about all things that matter. He intuitively understood how environment, nurturing, and genes all collaborate to produce an outcome. His insights provide guidance for the healthy growth of the advisory business.
Like people, some advisory firms are positioned for long-term growth while others will not make it past adolescence. We are nearing a turning point in which the future of our profession hinges on the actions of its leaders today. A primary concern is the profession's failure to consciously and systematically recruit people to this business, contributing to the loss of talented individuals to other industries.
The typical principal in an advisory firm is getting older, with the average age now falling in the mid–50s. The profession is not adding younger colleagues at a rate commensurate with the growing need. Every pundit, professor, and practitioner who knows this industry says we're nearing a critical shortage of competent people.
Ironically, the current market contains a surfeit of clients and a shortage of professionals to provide them advice. The law of supply and demand should render this environment ideal for creating growth for advisory firms. In most cases, however, the demand curve is driving up compensation for professional staff at a rate that outpaces firm productivity.
Another odd element in this particular talent shortage is that multiple surveys about career choices praise the advisory profession. For the most part, financial advisors have independence, good compensation, and the opportunity to live a balanced life. Just recently, Portfolio.com (February 22, 2008) named "financial analyst or advisor" as one of the "top 20 jobs for 2008."
What's Wrong With This Picture?
A stimulating career path, the opportunity to deal directly with clients, intellectual challenges, the potential for equity, and a substantial income; except for long walks on the beach, this is the perfect personal ad. Why aren't people drawn to this business in droves? Are we missing something?
Perhaps the appeal of this profession represents wishful thinking on the part of industry veterans. Perhaps younger people reject the business when they see how hard the practice founders worked? Or once they have experienced and witnessed the grind? Is something blinding us to reality? Why are job prospects turned off by the financial advisory business?
For years now I've been a voice in a Greek chorus of concern about how little has been done to check this talent drought. I'm now starting to believe that the issue is not just about the lack of available talent, but also the lack of talent development within advisory firms themselves.
Those canny advisory firms that are successfully addressing the talent shortage have three things in common:
- They articulate the nature of the work they ask people to perform.
- They focus on matching the right people with the right jobs.
- They create an environment in which motivated people will flourish.
Each of these characteristics is linked to the others. Many advisory firms rely solely on better technology and investment performance to drive their success. Ultimately, firms that do not build capacity with the right talent and develop their future advisors, managers, and leaders will not thrive.
Most firm managers are also advisors who must make difficult choices about where to spend their valuable time–on clients or on the business. Enlightened owners recognize that they must invest in the next generation of leaders in order to carry the business to a new level.
