Based on the recent job numbers, the so-called Great Resignation appears to be over, or at least in its final stages.
Time to take a look at the back office and see if the proverbial horses that left the barn will turn into prodigal ones and return.
Total nonfarm payroll employment increased by 209,000 in June, missing Wall Street’s lofty expectations of 240,000, and the unemployment rate changed little at 3.6%, the U.S. Bureau of Labor Statistics reported last Friday. Meanwhile, the change in nonfarm payrolls for April was revised down by 77,000, from a net gain of 294,000 to 217,000, and the change for May was revised down by 33,000, from a spike of 339,000 to 306,000.
With these revisions, employment gains in April and May combined turned out to be 110,000 lower than previously reported. So much for employees saying “so long” to their bosses in the overall workforce. But what about within the wealth management industry?
Ryan George, chief marketing officer for wealthtech platform provider Docupace, says what happens to financial advisors remains separate from the overall economy.
“When economic times are good, people seek out professional advice to maximize the economic opportunities they are given," he said. "When times are tough, these same professionals help them budget, plan and protect what they have. In both cases, the industry earns its stripes.”
George added that the Great Resignation also “never really applied to the top wealth management firms, especially in terms of back-office employees,” because firms with centralized technology and processes were already able to provide “the flexibility and opportunity disgruntled employees were seeking.”
Anecdotally, he said he’s actually seen an increase in the number of back-office employees among his enterprise clients, along with less turnover as a result of the steep training curve and the fact that many back-office positions require FINRA licenses.
Along those lines, Steven Brod, CEO of Crystal Capital Partners, said the increased complexity of the assets themselves has steadied the turnover in back-office positions. He cites the recent surge into alternative investments and away from traditional holdings as a reason for advisors to keep their highly trained staff happy and in-house.
According to a report by PWC, alternative investments’ share of global assets under management is expected to reach 15%, or $21.1 trillion, by 2025, a near doubling of the asset base since 2020.
“Investing in alts is complex. It demands portfolio management technology and involves overwhelming paperwork and fund-specific requirements related to sub-docs, capital calls, distribution notices, audits, and K-1s," Brod said. "Therefore, advisors will either have to increase their back-office operation or can consider partnering with an outsourced platform that handles these complexities and facilitates diversified alts investing.”
Dana Burkhardt, head of business consulting at AssetMark, is seeing less turnover in advisor offices. However, she says firms that haven’t put time and attention toward ensuring they have competitive wages, benefits, and great culture are still seeing employees leave.
“The job market is still strong, and there are a lot of opportunities for employees that are experienced in our industry. It is imperative that advisors spend the time to ensure they have a great culture and are competitive from a compensation standpoint to retain top talent,” says Burkhardt.
As for how much the back-office brood will be able to demand in the open market, that also remains an open question now that the power has started shifting from employees back to employers.
In June, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents, or 0.4%, to $33.58. Over the past 12 months, average hourly earnings have increased by 4.4%. In June, average hourly earnings of private-sector production and nonsupervisory employees rose by 11 cents, or 0.4%, to $28.83.
“We review and adjust wages annually and will continue to do so this year. However, as we are in a strong growth mode, we will be sure to offer competitive salaries to ensure we are securing top tier talent to support the growth of our firm,” said Stan Gregor, CEO of Summit Financial.
In recent years, advances in technology has also kept a lid on back-office wages and labor additions. Peter Brittain, head of business development at platform provider FusionIQ, says he expects that trend to continue as well.
“Enterprise clients we work with have noted a jump in productivity and satisfaction among back-office and other employees after replacing traditionally tedious applications with an easy-to-navigate multicustodial solution for the back office," Brittain said. "And with the wealth management industry focused on growth today, all-in-one platforms enable firms to scale, eliminating the need to bring in additional back-office staff as they increase AUM.”
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