Wealth managers lose competition for tech talent
Wealth management firms have nearly doubled their spending on technology in the past two years, according to consultancy F2 Strategy. Maybe more of that money should have gone to compensation.
RIA executives and other wealth managers say their companies have received a significant boost in resignations from their tech professionals, according to an F2 strategy reportand the reasons are simple.
Of 33 executives and other decision makers at some of the top wealth managers surveyed by F2 Strategy, a third reported an increase in quits. When asked why tech employees were leaving, all cited more competitive compensation elsewhere and 50% said employees left for a promotion or better career progression. Some also said employees left for a remote or more flexible work environment.
According to the report, the location and size of the company did not affect the results. Businesses big and small in big cities have struggled to retain talent, as have those in other places.
F2 Strategy periodically interviews a task force of approximately 85 CEOs, CTOs and other wealth management executives or decision makers. The consultant is not disclosing specific members of the invite-only group, but says their companies collectively manage more than $4 trillion in assets.
In a tight labor market, and at a time when hiring software developers is particularly competitive, wealth managers find themselves up against their usual peers as well as other types of companies, including those of Silicon Valley.
“Competition for tech talent in wealth [management] no longer comes from other wealth management firms, but from outside the industry,” said Doug Fritz, Founder and CEO of F2 Strategy. Intel RIA.
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Most resignations come from high-level engineering positions, Fritz said. However, competition for new graduates is also tough. An executive from the F2 Strategy cohort told Fritz that his company hired a recently graduated software engineer. A few days later, the new recruit terminated the contract because a competing company offered him a job with double the salary.
“Tech companies pay crazy amounts for these people, and banks [and other wealth management firms] just can’t compete,” Fritz said. Small businesses may struggle to meet rising wage demands, Fritz added.
Wealth management companies are spending more on technology; 84% of companies surveyed by F2 Strategy have increased their technology resources in the past two years and 78% plan to spend even more in the next two years. These resources are also used to adjust compensation packages – 61% of companies have developed strategies to mitigate attrition.
But a third factor is also attracting employees to certain companies. Companies need to make sure tech hires are emotionally and intellectually engaged, Fritz said.
“[Technology people] are very creative. If you put them in a room with one line of code and they stare at that code for 20 years, they’re gone. I don’t care how much you spend on them,” Fritz said.
Companies must train their employees in new technologies and create internal career paths for them, otherwise they will not feel professionally fulfilled. Some small businesses might not be able to pay as well as larger ones, but they can offer employees the opportunity to take on multiple responsibilities and make a significant impact on an organization, according to Fritz.
Holly Deaton (@HollyLDeaton) is a writer at RIA Intel and based in New York.