We are an industry fixated on assets. Assets under management, net new assets, asset gathering, asset growth. Assets, assets, assets! But have we inadvertently neglected the most valuable asset of all?

An industry-wide talent deficit looms large. From coast to coast the squeeze is on as firms struggle to find skilled candidates with whom they can negotiate reasonable compensation.

With a scarcity of experienced talent, RIA firms will face longer lead times when recruiting. As a result, firm productivity and growth will be increasingly difficult to sustain.

Since there are fewer candidates, advisory firms will have to compromise. The normal experience and qualification requirements will likely have to be loosened. Candidates are exerting their bargaining power and negotiating higher rates of pay, and industry compensation benchmarks are proving to be less than helpful.

The impact of fewer candidates, longer recruitment lead times and higher compensation has already started to hit home for advisory firms across the U.S. The pendulum has swung in favor of talent.

We are, of course, still emerging from the throes of the Great Resignation. Talented people across the economy are in motion, seeking opportunities that offer greater flexibility, compensation and benefits.

The question is, to what extent has this pandemic phenomenon affected the advice industry? According to data from the Bureau of Labor Statistics, pandemic resignations may not be all that easy to explain away.

In August 2021, the U.S. all-sector “quit rate” reached 2.9%, an all-time high since the data was first collected in 2000. Driving this result, unsurprisingly, was the leisure and hospitality industry with a whopping 6.4% quit rate. Heavens, who could blame them?

At the same time, the U.S. financial sector quit rate was just 1.3%, down from 1.8% in October 2019. But we’ve seen worse: For historical context, the quit rates were worse during both the dot-com bubble and the global financial crisis.

In short, the Great Resignation is not the leading contributor to the industry’s talent shortage. Macro trends indicate the issue is far bigger than we have contemplated. This is not a pandemic issue, or just a U.S. issue. This is a global experience.

The consulting firm Korn Ferry has embarked on multiyear research called “Future of Work.” One of its reports, “The Global Talent Crunch,” predicts a global talent shortage of 85 million people that will lead to $8.5 trillion in unrealized annual revenue by 2030. The U.S. financial services sector is expected to suffer the most. The lack of skilled talent is predicted to stunt growth by $436 billion (as measured by projected unrealized economic output).

It isn’t a shortage of people; it’s a shortage of skills. There will not be enough skilled people with the experience and qualifications required for the positions needed. According to the research, the number of rapidly retiring boomers are a leading contributor to this problem.

Larger global trends move slowly and surreptitiously. The Great Resignation may be a mere warning flare drawing our attention to the horizon. The question for all businesses is: How can we increase access to this increasingly scarce asset?

You could argue that robots and A.I. will reduce the demand for human assets, but the research suggests otherwise. According to another Korn Ferry report, “The Very Human Future of Work,” even giant digital age advancements won’t change the fact that the world’s most valuable asset is, in fact, human.

In recent history, it is human ingenuity that has created transformation and true “productivity-boosting power.” The Korn Ferry research maintains that, aside from a spurt from 1996 to 2004, “the digital technology revolution actually hasn’t boosted overall productivity.”

In the U.S. alone, human capital assets, including labor, knowledge and people, equate to $244 trillion, whereas there’s only $62 trillion in physical capital assets such as technology, inventory and real estate. The authors are unequivocal: “Talent trumps tech.”

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