Advisory firms face hiring challenges, lack of succession plans: DeVoe
Study finds cultures of RIA firms (including employee morale and engagement) were negatively affected by the pandemic.
Advisors should be prepared for employee retention risks and a more challenging hiring market, says DeVoe & Co.’s 2021 RIA Talent Management Study, released Tuesday. The study paints a bleak picture of the pandemic’s effect on the wealth management industry, and on its people in particular.
DeVoe conducted a survey between February and May among 123 representatives of RIA firms. Respondents were senior executives, principals or owners of firms with $100 million or more in assets under management.
The study found that the cultures of RIA firms were negatively affected by the pandemic, with 38% of advisors saying their firm’s culture had declined. Although this deterioration came on suddenly, repairing any damage to culture will take a long time, DeVoe said, noting that firm culture is among the most critical influences on employee engagement.
Employee engagement suffered because of the pandemic, the survey results showed, as four times as many advisors said it had a negative rather than a positive effect. Several factors may account for the lack of engagement, according to the report.
One is that team members have been unable to physically work together, leaving them isolated and disconnected from their colleagues.
Another is that workers are reexamining their career paths because of pandemic-related stresses. Others may look for alternative employment if their current organizations require staff to return to the office full time — at a time when opportunities for those seeking a change are on the rebound.
According to the study, the new and evolving remote work paradigm will create workplace dissonance within RIAs for the next several quarters, or perhaps even years.
Fifty-two percent of advisors surveyed said they expect remote work at their firms to remain permanent to some extent after the pandemic, while 28% expect a full return to the office when safe. Twelve percent of respondents said they were never remote workers.
One positive finding was that although the transition to remote work may have been disruptive, productivity did not suffer as much as many had expected. Sixty percent of respondents said the pandemic did not affect productivity levels at their firms, and 25% said it had improved.
Transition to the next generation
The study found that 61% of participants have low confidence that their next generation is ready to seamlessly transition into firm leadership roles, compared with 56% in 2019. DeVoe said this troubling trend should set off an alarm across the industry.
Especially concerning is the growing number of firms that report significant or severe challenges regarding their organizations’ readiness to transition leadership and management to the next generation, rising from 15% of respondents in 2019 to 23% in 2021.
The report said this increase was largely due to four times as many advisors reporting that their firms have no transition-suitable next-generation candidates in place, likely because founders are scrutinizing their successors in light of the pandemic and concluding that more work is needed.
Only half of survey participants reported that their firms had implemented a succession plan, down from 55% who said so in 2019.
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