Whether promoted from within or hired from outside the firm, each of four core advisory positions tracked in InvestmentNews' benchmarking study has seen an uptick in women entrants.
It's recently been reported that women are now better educated than their husbands and control over half of all private wealth. However, change has been slow when it comes to gender diversity among financial advisers.
But this year, the data is hinting at positive change in achieving gender parity among independent advisers. According to the 2018 InvestmentNews Compensation & Staffing Study Update, sponsored by Pershing Advisor Solutions, each of the four primary advisory positions tracked in the study, from the entry-level "support adviser" to the "practicing partner" owner-adviser role, showed an increase in the proportion of women newly inhabiting each job, whether the incumbent was promoted, transferred or hired to her new role.
This reading of the study's measurements does not account for workforce churn rate, which could skew new-hire figures based on one gender's proclivity to switch jobs more frequently than the other (although research has found that men and women leave their jobs at similar rates), but it is nonetheless an encouraging sign in an industry that suffers from a lack of diversity.
In professional services, scale isn't achieved through operational efficiencies. In fact, if anything, overhead spending as a percentage of revenue increases as firms get larger. Scale is achieved from leveraging supporting professional talent to add capacity and enlarge the firm profitably. Independent advisory firms are growing quickly — revenue increased by 12% on median at the typical firm last year — and need advisers to support the service they're accustomed to delivering their clients.
Seeking talent from a range of sources — whether via gender, age, racial or even intellectual diversity — could be a boon as the industry solves for a talent crisis. The study found evidence that firms are having a difficult time locating new talent, as shown by the composition of advisory hires. "Service advisers," for example — employees working directly with clients formulating and implementing advice and have six to eight years of experience when they start in the role — who were hired from outside the firm were much less likely to have a certified financial planner designation (47% of those hired have one versus 65% of internally developed talent).
Further illustrating the difficulty in finding qualified talent, the study found that the majority of newly hired service advisers previously worked in an area of financial services outside of traditional advisory channels or asset management (25%), or outside financial services entirely (27%).
Although firms are having a hard time finding experienced advisory candidates, they are hiring entry-level advisers at a dramatic pace — nearly half (49%) of firms hired an entry-level adviser in the past year, up from just 14% in the prior-year study — and opting instead to grow talent from within. And it's encouraging to see the numbers grow increasingly diverse, at least in terms of gender; 47% of new support advisers are women, up from 37% in 2017 and above the overall 41% recorded last year.
In a study about improving gender diversity in the advice industry published earlier this year by InvestmentNews Research and conducted in partnership with State Street Global Advisors, one of the top two barriers to achieving greater diversity cited among both men and women advisers was a lack of awareness about financial advice as a career. Previous generations of new advisers often started their careers calling numbers randomly out of a phone book and were compensated based on those sales efforts, but the fiduciary model and the recurring fee-based revenue it supports have fundamentally altered the career from a sales-oriented to a service-oriented endeavor. That development has left a gap in training and awareness in its wake.
The big challenge faced by the firms seeking new talent is overcoming that awareness gap, as well as counteracting the high attrition rates of women advisers: over 40% of entry-level advisers are women, but less than 20% of partner-advisers are. Training and mentoring, culture, benefits that support work-life balance, defined career paths and a concerted effort to put women in leadership roles that will inspire success in the next generation will all go a long way toward solving not just the gender gap in advice but the wider talent shortage the industry is experiencing.