Financial services firms, both in Canada and globally, are expecting a huge growth in assets under management over the next several years as wealth is transferred from an aging population to their children. But the industry’s ability to capitalize on this opportunity could be jeopardized by what some see as an impending crisis in terms of recruiting the next generation of advisors.

“We’re on the edge of a pretty severe talent shortage,” says Jeffrey Gandz, a professor at the Richard Ivey School of Business at the University of Western Ontario in London. Gandz says that demographic trends suggest that the financial services industry may be in for a tough time finding enough advisors to take over from those looking to retire: the jury remains out on whether young people will choose the advisory business over other careers. “I don’t think it’s an acute problem, as in this year,” he says, “but it’s very close on the horizon.”

A study published last year by Pricewaterhouse-Coopers LLP on the global private-banking and wealth-management industry found that while CEOs expected AUM to grow by more than 20% annually over the next three years, they were not taking into account the problem of finding enough advisors to handle the increased business. “There are simply not enough quality people to support the market’s anticipated growth,” says the report. “Winning the battle for client relationship managers will be crucial.”

According to a joint study by the Toronto Financial Services Alliance and consulting firm Deloitte LLP, published last year: “Industry leaders and human resource executives recognize that technical skills are in short supply, competition for talent is increasingly fierce, and significant talent shortages will follow.”

Some industry leaders feel that the so-called “labour shortage” issue in the advisory business is overstated. Winnipeg-based Investors Group Inc., for example, is one of the industry’s biggest recruiters of advisors. It has brought aboard 1,135 new consultants since June 2004, for a total of 4,342 as of March 31, 2008. “The financial advisor career is one of the most sought after [by young people],” says Rob O’Keefe, senior vice president with Investors Group. “They’re saying, ‘How can I get into it?’”

However, Investors Group, along with the banks and some insurers, are the only large-scale recruiters in the industry. Other firms, lacking the scale, expertise or the will to handle the recruitment and training process, rely on luring experienced advisors away from competitors.

“You have a significant number of companies that say, ‘It’s just not cost-effective for us to hire’,” says Dan Richards, president of Toronto-based financial services consulting firm Strategic Imperatives Ltd. “And that’s OK if only a few companies do that. But if that becomes the industry consensus, then you have a problem.”

Part of the challenge is that the role of advisor is changing. Clients are more sophisticated and informed, products more complex, and compliance and regulatory issues ever-present. Yet firms understand that the key to gaining a greater share of wallet from clients is for advisors to establish strong relationships.

“We are now in the professional wealth-management business, as opposed to more of the brokerage business of the past,” says David Agnew, national director at RBC Dominion Securities Inc. in Toronto. “And the business today is advice-based, it’s not necessarily about the transaction. That’s what we focus on very much [at our firm.]”

Even at the country’s biggest bank, though, finding and keeping qualified advisors remains a challenge. DS hires 100 new advisors each year, with an average of 40 of those still in advisory roles three years later, and another 15 still with the brokerage or the parent bank in non-advisory roles, Agnew says. DS has also brought aboard 125 experienced advisors from other firms over the past three years.

“Twenty-five years ago, people would come into this business without financial experience; they would come right out of university and build a practice,” Agnew says. “In today’s environment, many people are coming into this industry as a second career, so that’s where it does become very, very competitive with other financial professional careers [to attract new people].”

Where the industry may feel the crisis most in the next few years is when advisors, looking to retire or at least scale back, seek successors and find that suitable people are tough to locate.

@page_break@ “The core of this industry has a major problem on its hands because it abdicated responsibility for the hiring of producers, starting from the late 1980s basically through today,” says Steve Cole, regional vice president of sales and recruitment with Desjardins Financial Security. “We, in essence, eliminated an entire generation.”

The industry today is in catch-up mode, Cole adds: “It takes an organization [the size] of Desjardins to do it. You have to be prepared to make a pretty major investment.”

There are many signs that the industry as a whole is taking steps to remedy the situation. A number of academic institutions are now helping to train tomorrow’s advisors. That includes Halifax’s Dalhousie University, which offers an MBA program in financial services, and Toronto’s Seneca College, which offers a financial services practitioner program.

And firms such as DS have charged branch managers or regional directors with the responsibility of helping bring new people into the industry. IE