The study of registered investment advisers (RIAs) found that 60% say finding qualified professionals was just as hard as finding new clients. Pershing said that was a big difference from its last human capital study in 2006—which showed that finding new clients was considered far more difficult than recruiting talented advisers or managing employees.
Many firms also reported that retaining employees has grown as a key challenge (33% in 2008 versus 25% in 2006), according to a press release of the results. The majority (63%) of firms reported they see a shortage of talent within the industry, and 69% consider relationship managers the hardest job to fill this year, followed by operations managers (61%.) The toughest job to fill in 2006, portfolio managers, is considered one of the easiest in 2008.
It’s not all about the money: The study shows a firm’s compensation package is increasingly less effective at recruiting talent than lifestyle factors like corporate culture, work/life balances, and public reputation. The study found that only 45% of firms consider base salary an effective recruiting tool in 2008, compared with 60% in 2006. In contrast, 77% consider a firm’s reputation the top recruiting tool, versus 69% who previously held that view.
Pershing said firms are increasingly focusing on employee career development. The study found 80% of firms are now giving employees periodic performance reviews, compared with 72% of firms in 2006. Well over half (64%) say they place as high an emphasis on employee satisfaction as they do on client satisfaction. Fewer firms (40%) held that view in 2006.
The time crunch for all firms is clearly growing, Pershing said. Time management replaced recruiting on top of the list of challenges reported by RIA firms, with 86% citing it as a top challenge this year, compared with 68% in 2006. A majority of firms (57%) are addressing this challenge by segmenting their clients so that they can target discrete groups with appropriate services, staff, and differentiated pricing levels. Client segmentation has increased since the 2006 study, when only about half of all firms segmented their clients. Also, firms are also increasingly outsourcing labor-intensive tasks such as estate management and tax preparation.
Pershing Advisor Solutions LLC, a subsidiary of The Bank of New York Mellon Corporation, commissioned the study, “A View From the Top 2008: Trends in Managing Human Capital.” The study, which gathered 308 respondses from principals of fee-based or dually registered practices with a minimum of $50 million in assets under management, was conducted by InvestmentNews and HNW, Inc. in May and June.
“Profitability concerns among advisory firms have skyrocketed since 2006,’ said Stacey Haefele, president of HNW, Inc. “Since this study was conducted prior to some of the steepest declines and volatility in the markets, we can safely surmise that client portfolio losses will only serve to heighten profitability concerns. Firms need to place a higher premium on maximizing human capital and work at peak efficiency in order to succeed in the current market environment.”