Advisers pushing ahead with hiring plans despite Covid-19, says new survey
Advisory firm recruiting is moving ahead despite the current market environment, according to a survey conducted this month by Northern Trust Asset Management’s FlexShares Exchange Traded Funds.
The survey found that 41 per cent of financial advisers are making plans to grow their team in the near-term, defined as “during or soon after” this market downturn. Furthermore, over half of these firms (52 per cent) anticipated updating their work-from-home policies after health concerns from the coronavirus have dissipated.
As companies refresh their recruiting and retention policies surrounding the pandemic, a late 2019 survey by FlexShares on advisor teams and diversity found that many advisory firms are underprepared to address investor preferences for diverse talent. The survey, which asked 200 investors about their advisor preferences and over 500 advisers about their internal strategic recruiting initiatives, found that while investors express indifference to demographic features, in actuality they choose advisers who look like them.
According to the 2019 diversity survey, 68 per cent of investors said they have no preference for race and 76 per cent said they have no preference for gender when looking for an advisor. However, these same investors work with advisers of a similar age, gender and racial profile. When it comes to gender similarity, women were found to be four times more likely to work with a female advisor than men are. Investors also search for advisers that match their ethnicity, as 98 per cent of white investors from the survey work with white advisors, 75 per cent of Asian investors work with Asian advisors, and over half of all non-white investors (63 percent) work with non-white advisors. The same principle applied for age similarity. Investors under 40 prefer advisers in their 30s and 40s, while investors in their 40s and over, tend to prefer advisers in their 40s and 50s.
“As US investors become more diverse, it’s critical for advisory firms to consider investors’ desire to work with advisers like themselves,” says Laura Hanichak Gregg, Director of Practice Management and Advisor Research at FlexShares. “Firms that prioritise their diversity recruitment are best positioned for growth in the long run, as those firms will provide investors more options to find an advisor with whom they connect.”
While diversity initiatives may position advisory firms for long-term growth, most advisers ranked diversity low on their list of strategic priorities. When asked to identify initiatives that would help their firm align with the future of the industry, integrating technology and offering services beyond investment management ranked most important. Diversity, however, ranked eighth out of nine initiatives on the list, just before hiring professionals re-entering the job market or changing careers. When it comes to hiring diverse talent, more than half of advisers surveyed (55 percent) do not believe increasing diversity should be a strategic priority. Furthermore, 61 per cent of advisers claimed to still recruit using personal networks of friends, family and neighbours.
"Financial services companies need to implement changes around diversity efforts now, an initiative that Northern Trust has strongly prioritised for well over the past decade to better serve clients of all demographics," says Darek Wojnar, Head of Funds and Managed Accounts at Northern Trust Asset Management. "We hope that our proprietary research can help shed light on diversity as a business imperative for the advisor networks we serve. We need to address these demands cohesively as an industry.”
Another key takeaway from the survey is that investors look for advisers who are supported by a team. In fact, 72 per cent of respondents agreed it’s important for a financial advisor to work with a team, rather than operate independently. advisers similarly ranked building a team-based practice as an important initiative for ensuring future success of an advisory firm. When considering the significance of teams-based practices, advisers ranked it fourth on a list of nine initiatives, preceded by technology integration, offering services beyond investment management and rethinking firm value beyond investment management.
Comparatively, investors’ demand for team-based practices aligns with advisors’ motivation to prioritise team dynamics. This indicates that a firm doesn’t need to change its business model to achieve future success, as this can be accomplished by recruiting more diverse talent and addressing the people that make up the business. However, nearly half of advisor respondents agreed that the biggest challenge to building a team-based practice is recruiting and hiring the right people.