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The Market Solution

There’s a lot of hand-wringing all over the profession about the shortage of staff advisors and successors—the people who are needed to take the place of thousands of RIA firm founders who are approaching retirement.  

I’m not worried about this alleged ‘talent shortage’ at all.

Why?  In my experience, the marketplace itself takes care of these problems in its own time and with great efficiency.  If you’re wondering how that would happen in this particular case, consider that advisors are now competing for talent, and rearranging their firms to make them more staff-friendly.  

In a talent-competitive marketplace, RIA firms are going to have to pay more for new hires, provide better work environments, acquire more up to date tech, and provide career training.  

As they do that, working at advisory firms will become increasingly attractive to more people.  The logical result of higher salaries and attractive work benefits will be an influx of career changers, who will see financial planning as a pasture greener than, say, their psychology career, their staff position at a trust company, their associate position at a law or accounting firm.  Meanwhile, we are already seeing a growing number of brokers moving into the greener pastures of independence.

Note that most of these adaptations were long overdue anyway; financial planning is simply catching up with all the other professions in how it attracts and retains key staff members.  Catching up also means that there will be dropouts—as in: every law firm hires young attorneys, and only a few of them move all the way up to partnership level.  Same with accounting firms.  The result is people leaving the firms at some point when partnership looks unattainable, and starting their own small businesses.

The result will be a new reseeding of the smaller cohort of RIAs who will function as local or niche competitors to larger entities.   

Higher salaries will necessitate (finally) the development of more effective workflows, and technology advancements will allow firms to reposition their back office staff toward client relationship management—which I think is a different skillset than providing technical advice and guidance.  We don’t yet have a clear picture of how AI will affect advisory firms, but it isn’t hard to imagine that the new AI tools will make them more efficient and drive down internal costs.

One can reasonably expect that a changing of the guard, where the next generation takes the reins at advisory firms, will change the landscape still further. Most younger advisors I talk with are eager to move into the blue ocean of serving younger, less-wealthy clients, and to operate on a revenue model that is not tied to AUM.  Instead of labor-intensive onboarding, they and the relationship managers will schedule monthly or quarterly Zoom meetings with their clients and provide (scalable) ongoing coaching and advice.

We often hear that most people don’t know about financial planning as a potential career, but that isn’t really surprising when the center of gravity in the profession is still a founder-centric business with adjunct staff, and when there has, historically, been a buyer’s market for talent.  Word has a way of getting out when there’s a profession or career that is a seller’s market, especially when it’s a career that provides as much job satisfaction as financial planning.  The marketplace doesn’t like imbalances and tends to correct them, and I think, despite all the hand-wringing about a talent shortage, that it is in the early stages of making sure there will plenty of people to provide financial planning services for all who want/need them in the future.