The period since March 2020 has led to a profound re-evaluation of work. And that's now playing out in what's been dubbed "The Great Resignation."
The phenomenon was dramatically evident in April, when 4 million people in the U.S. quit their jobs. But that may be just the tip of the iceberg. Globally, 41% of workers are considering resigning from their jobs, according to a survey by Microsoft. Nearly half of U.S.-based employees are re-evaluating the kind of work they do, research firm McKinsey found.
Behind it all is the COVID-19 pandemic, which has disrupted long-accepted assumptions about how and where we work. Employees have discovered they don't necessarily have to be in the office to do their jobs effectively. They might even be able to work from another state.
Work from home has improved the quality of life for untold numbers of Americans. They've experienced leaving their desk to take a walk or run to the grocery store without feeling monitored. They've gotten used to having breakfast and dinner with their families every day.
The work-from-home period made employees, including those in the wealth management industry, reflect on what else they could improve in their lives. And COVID-19 has reminded us that life is too precious to spend in an unhappy work situation.
All of this is creating a challenge for leaders in the advisory industry, as their goals and those of their team members in many cases begin to diverge. One clear flashpoint is the conflict between employers who are asking their teams to return to the office, and the team members who want to continue working from home.
Leaders shouldn't be surprised by this new friction. COVID-19 has offered a lesson in how humans adapt to upheaval. When something we're accustomed to is taken from us, we adjust our lives around its absence, and over time may re-evaluate its importance. Pre-coronavirus, members of an advisory team may have seen high value in gathering with their colleagues each day in the office. Having spent a little over a year without it, some now wonder why it was ever necessary.
On the other hand, times of upheaval may give us something we didn't know we longed for. Countless American workers have kissed their daily commute goodbye, often reclaiming two hours of personal time each day. Many are loath to surrender this windfall.
Challenge and Opportunity
"The Great Resignation" is not a topic wealth management leaders want to see trending. Turnover can stress business operations and potentially cost firms clients.
But this moment also brings an opportunity for firms to optimize their talent mix. It's a chance to bring in the people who fit your firm's values and beliefs, and perhaps even improve your talent levels in the process. I'm going to argue you should lean into the turnover moment, if your firm is experiencing what the rest of the world is trending.
Fear of doing so is natural: Retention is very important to businesses' long-term sustainability and profit margins. But having people in your organization who don’t share your values and beliefs, or don’t want to work the way you want, is ultimately more costly than turnover. Misfit employees need to be monitored and managed, which soaks up leaders' valuable resources of time and attention.
To be sure, personnel decisions can be complicated and fraught with emotion. But the right thing to do becomes clearer if you allow your values to guide your decisions. Your organization's core values are your North Star, the key to your sustainability and growth.
These values should be so fundamental that they rarely change. If they've changed as a result of the pandemic, they were not strong enough to start with and should be redefined. In fact, this is a good time for all advisory businesses to review their core values and commit to making their culture match those values going forward.
But to put it bluntly, if a team member will only stay with your firm if you change your values or culture to accommodate them, let them go. Don't veer from your North Star because their value system never matched yours or has changed over the past 20 months.
Consider a hypothetical example from the mutual fund industry, a business that's adjacent to wealth management. Fund Company X's core value is to generate the best possible return for investors. Each of its traders is critical to achieving that result. Now suppose that a talented trader wants to permanently eliminate his commute and work from home. While in theory it might feel good to grant the request, doing so wouldn't align with the business's core value of maximizing returns. That's because Fund Company X's culture of face-to-face idea sharing and accountability is pivotal to maximizing returns.
The Scarcity Myth
Team members don't always grow in tandem with their firm. A person who did fine at one revenue level might lag behind as the firm grows. If you lose such advisors in this environment, look to replace them with others who can help sustain the growth you're seeking. To do this, you have to reject the narrative of talent scarcity and embrace a growth mindset.
We're in a bull market for advice, and that's showing up in advisory firms' revenue growth.
Herbers & Co.'s data shows that our client firms are averaging a 23% net-new-asset growth rate this year, after a strong 2020. Strong growth means firms have the resources to hire better talent.
And that talent is available, even to smaller firms. The large businesses that are buying up smaller ones like to warn that small firms need to find buyers in order to access resources. And the retirement wave of baby boomers is real; the industry as a whole needs more young talent. So merging might be a good solution for some.
But COVID-19 has shaken the snow globe and put the work force in flux. We see small firms having an edge in valuation and the ability to attract talent, even as some of their people opt to leave. There's never been a better opportunity to recruit good people than right now.
If anything, most advisor firms historically have failed to hire fast enough. Finding talented people who match your values and culture takes time--we estimate three to five months for an average hire. To make that timetable work, firms need the foresight to hire people before they're needed. Most of our client firms start the process when they're running at around 80% of capacity.
We highly recommend this practice. Too often, firms run their businesses at 100% capacity, or even 110% or 115%. That strains the team. Before long, quality slips and growth stops. Finally, the firm posts a job description or hires a recruiter. But after 15 or 30 days of not finding the right person, they conclude, erroneously, there's just not enough talent out there. As a result, they may wind up hiring people who don't belong at the firm, which ultimately hurts more than it helps.
The bottom line: Don't fear turnover. There is opportunity right now to bring in the pieces that will allow your firm to reach its full potential going forward, even if you lose one or two.
Angela Herbers is the founder and CEO of Herbers & Co, a consultancy firm for financial advisors.