How to address recruitment challenges in the financial services industry

Companies in the financial services industry are faced with a major challenge. According to Cerulli data shared by Lindsey Lewis, executive director and chair of The American College Center for Women in Financial Services, over 100,000 financial professionals will exit the industry over the next decade.

This projection underscores the urgent need for the financial sector to revamp its talent acquisition and retention strategies. Lewis, pictured above, points out that this challenge is compounded by a decline in the percentage of advisors, with a decrease of 1.9% last year, highlighting a significant gap that requires filling.

Moreover, the demographic shift in clientele adds another layer of complexity. With these circumstances taken into account, Lewis highlights several key factors for financial services companies to consider as they attempt to innovate and address these challenges.

Changing demographics and client needs

A substantial wealth transition, estimated between $10 to $30 trillion, is expected to transfer into the hands of women between now and the year 2030. Lewis notes that research shows widows, who often take control of finances after their spouse's passing, frequently switch financial professionals within 24 months.

“Research actually shows that people who are heterosexual couples, 70% of the time the widow will fire their financial professional within 24 months after their spouse passes away,” adds Lewis. “The needs of these clients are changing over time - the lived experiences of some financial professionals may not resonate as well as with some other financial professionals.”

Diversity stagnation and workplace innovation

Post-COVID, Lewis emphasizes the efficiency of remote work and questions the necessity of returning to office-based work entirely. She suggests reevaluating traditional hiring pools and considering professionals from other sectors, such as nurses or realtors, who possess relevant skills and qualifications.

"The work-life integration shows that people can work very efficiently at home," she tells IN. “So I don't understand why there’s this return back to work. Nurses most likely have an advanced degree or a college degree... and wouldn’t they be great candidates to bring over to financial services?"

Mental and systemic barriers

Lewis acknowledges both systemic and individual barriers to entry in the financial sector, advocating for advanced education and designations to help boost confidence and break down mental barriers that prevent some individuals from considering a career in financial services. She promotes transparency in job roles to help individuals find the right cultural fit within the industry, emphasizing the concept of "income risk capacity."

“There are some barriers, some like systemic things that need to be changed and adjusted. But then there's also a lot of mental barriers that people put in place. We found through our research that having advanced education or degrees or designations really helps with that confidence factor.”

Financial education for the benefit of society

Looking to the future, Lewis sees continuing education as a core component of the financial sector's evolution. Despite advancements, she notes deficiencies in financial education, particularly in schools, and highlights initiatives like The American College of Financial Services' Knowledge Hub platform to address this gap.

“[It’s about] just building some transparency around what it's like in those particular roles,” she explains. “Frequently, you'll see people self-select out of the industry because they're in a bad cultural fit of a firm - saying financial services is wrong for you when maybe it's this business or this entity.

“What happens with some folks is that they don’t have a lot of capacity - not a lot of tolerance – and they get put in a commissions-only type of role [making them] really unhappy. [Instead], they could be in a salary based position where they don't have as much upside but they're meeting the needs that they [have] to.”

Future trends and education

Lewis concludes by stressing the importance of staying updated on emerging trends, such as digital assets and Secure Act 2.0 to meet evolving client needs. She also emphasizes the necessity for financial advisors to adapt to technological advancements, such as artificial intelligence (AI), that can drive growth and efficiency while maintaining compliance standards.

“When I think of 60% of Gen Z, their first investment interaction is with a crypto asset," she adds. “If you’re going to inherit these clients, and you don't have a Dogecoin or even know how to put it within the context of financial planning, that's going to be an opportunity for folks to fire you. It’s about making sure you stay updated, especially with the rise of AI, understanding how to leverage it from a compliance aspect.”

Opinion and Advice from Lewis

For institutions, tracking and benchmarking are identified as essential practices for driving innovation in talent management. Lewis underscores the need to assess progress continually and explore untapped talent pools to ensure future success in the financial services sector.

Lewis also highlights that even though many strides have been made, there is a lack of diversity within financial services. Even in the CERTIFIED FINANCIAL PLANNER™(CFP®) community, there is still only 23% who identify as women—a figure unchanged over two decades. Mckinsey Data shows that diverse teams lead to increased revenue.

This reinforces the point that financial services must not only bring in more women, but also people from other marginalized groups including the LGBTQIA+ Community, and individuals with different racial and ethnic backgrounds. However, bringing these individuals into the fold accomplishes little if a company has not established a culture under which these individuals can flourish, thrive, and, most importantly, feel welcomed.

Championing women in finance is both a professional and personal mission for Lewis. With her at the helm, the Center for Women in Financial Services aims to dispel misconceptions about financial services perpetuated by media portrayals, highlighting the industry's focus on helping clients rather than high-stakes drama.

By bringing clarity to these common notions and providing a more realistic view of the profession, Lewis hopes to create a more welcoming picture of the financial services industry that accommodates people of all backgrounds—and if companies within the industry heed her call to innovate, that vision may become a reality sooner than expected.