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Hire Now if Possible – 3 Reasons to Hire in Turbulent Times
Now Can Be a Good Time to Hire People if Companies Can Afford To by Caleb-Brown. For businesses that don’t have to cut budgets during the pandemic, this could be the right time to add some top staff.
For a decade, the financial planning profession has enjoyed strong stock market returns, which has led to firms growing and hiring at an impressive clip and posting record increases in profit, revenue, and assets under management.
This could not continue indefinitely, though, due to the cyclical nature of the stock market — or the coronavirus’ impact on the economy. So how should firms approach their human capital planning now?
For firms that have been struggling to attract talent and hire top performers, it might be a great time to build out your dream team. Here is how a firm can capitalize in a turbulent market environment:
1. Less Competition for Talent
One of the most significant challenges even good advisory firms have faced is trying to find “A” players to join their teams. Their offerings may be compelling, but due to growth of the profession, there is more competition for talent.
Once revenue started to fall, many will enact cost-cutting measures such as hiring freezes and staff cuts. This may work in product-based businesses, but not as well in service-based businesses, where demand from clients actually can increase substantially when markets are down.
Firms employing an asset-based fee model that are not being managed well (i.e., didn’t have healthy profit margins as a buffer against a downturn) will begin to feel the squeeze first.
For the best managed firms, who have built up healthy cash reserves, or run at healthier (e.g., 20%-plus profit margins), temporarily declining revenues in a bear market aren’t necessarily a cause for instant panic, and may not need to have to take quick drastic actions to reduce expenses.
This is especially true because client assets are typically invested into well diversified portfolios that should not have a commensurate reduction in value compared to the actual market decline (i.e., market declines 25%, but client portfolios and revenue “only” drop by ~10-20% as an average across the entire client base).
This could be an ideal time to double down and invest back into the business as talent/people/advisors are the largest asset at a firm’s disposal for calming client nerves and handling service requests.
For firms that have moved away from the asset-based pricing and into project and retainer fees, a market downturn will have less effect on revenue, thus creating a unique competitive advantage.
2. A Larger Talent Pool
When fewer firms are hiring, it means more available candidates.
Also, some firms that have not been managed as well will lay off people, while some people may resign voluntarily and look for new/better opportunities due to lack of faith in current management or reduced compensation.
The last time we saw this was in 2008-2009, when the supply of high-caliber candidates outweighed the demand in most of the major talent markets.
While some candidates will be concerned about moving in uncertain times, there is a larger percentage of job seekers who were happy when everything was going well but are more willing to consider a move when industry-wide disruption is present.
Therefore, some firms may increase recruiting and hiring during this time. Also, demand for planners may shrink to levels causing prices for talent to come down, thus a timely opportunity to hire someone at lower prices than a few years ago.
But be careful low-balling candidates as this can sow problematic seeds within your firm long after the market recovers. It is not a reputation you’ll want to have for future hiring.
3. Client Service Standards
Successful service firms have one thing in common: they take great care of their clients. This is evidenced in the low attrition rates and high referral frequency that the best managed firms often cite about their clientele.
In times of turmoil, clients need you more than ever. This is the time to show them how valuable a trusted advisor can be by preventing them from making unwise decisions based on sound bite headlines meant to stir emotions.
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