Sally Humphris

As the nation’s financial services industry continues to focus on its greatest-ever remediation efforts through 2020, the leaders of many institutions have overlooked one of the most important areas requiring remediation.

The boards and leadership of most impacted organisations, including some of the biggest listed companies in the country, are missing remediating the cause of most of their problems identified by the Hayne Royal Commission, notes three of our industry’s specialist recruiters.

“Few of our financial services organisations have recognised that their problems were not caused by processes or by technology, but by people,” says Sally Humphris, Executive Director at specialist wealth management industry recruiter Super Recruiters.

Ms Humphris cited how APRA recently described the risk and compliance functions of the nation’s largest financial institutions as being in need of urgent overhaul. Institutions have staffed these departments with many additional people, but these people are not necessarily addressing the problems, according to APRA, she noted. “This suggests institutions need more skilled people with proven performance and expertise who can make a difference, not just more risk department headcount.”  

“This highlights how many of the financial services industry’s hiring, management and engagement process need to be remediated.

“Many industry leaders have not begun thinking about how to remediate this major problem. They continue to use those same out-dated HR department screening and selection processes. This needs to change in 2020.”

The people problem

Ms Humphris cited research by LinkedIn that shows the majority of candidates hired are selected on ‘gut feel’, despite the fact this is successful[1] only one in seven hires. “These are low odds for success and investment owners and managers would not invest in a company with those odds. So why do their HR departments? Yet this remains how most financial services organisations hire.”

“Research clearly shows that traditional resumes and job interviews alone are poor predictors of actual job performance. Interviewees give rehearsed answers and interviewers pick candidates they like rather than those whom have a proven track record of delivering results.” 

She added that further research by Harvard Business School[2] shows that 90% of business strategies fail due to poor execution. “Our institutions require candidates who are proven delivers more than ever.” 

The LinkedIn research also showed that almost two-thirds of HR teams admit their traditional interviews failed at assessing candidates’ soft skills. Yet it is these soft skills that organisations are increasingly looking at assessing for cultural change. Ms Humphris added: “All organisations want to ensure they are employing people with the values of honesty and integrity they require in order to match customer and community expectations as highlighted in the Banking and Financial Services Royal Commission. To do so, they need to transform their hiring processes.”

Technology alone is not the answer

James Lai, Director of HR tech firm Meetig8, said: “The recruitment process needs to be transformed in many financial services organisations in order to better consider candidates’ past performance and cultural fit, not just in their own words, but also from past and present colleagues. This can be done, combining both improved technology and more objective people skills.”

“Wealth managers don’t invest in stocks and companies the way they invest in people. They do much more research, assess past performance to select proven performers. It should be the same when it comes to hiring people. It is also important to look at what lessons candidates learnt from any past poor performance and also their values and cultural fit with the organisation.

“There are many people with a history of poor performance and cultural fit that can undermine an organisation and lead to the issues that we have seen brought to public attention through the Hayne Royal Commission,” said Mr Lai.

Paul O’Brien, principal of risk consultants Riskwise Professionals, adds: “We all know how hiring the ‘wrong’ person to an organisation can cost time, money, clients and reputation. It is time our industry leaders removed the risks that have been, and in many cases still remain, inherent in their HR departments. 

“2020 is the time to transform our industry’s financial services people practices.” 

Super Recruiters’ recent Super Industry Issues 2020 Report[3] found many c-suite leaders were uncertain as to how to transform their human resources practices, with almost 40% not happy with it. But less than a third expect to transform it for the better – see charts in the attached. 

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Sally Humphris

Employment prospects are looking up in our industry. “A third of wealth management organisations recently surveyed said they expected to hire more employees this year (32%),” notes Sally Humphris, Executive Director at specialist wealth management industry recruiter Super Recruiters.

“Two out of five (42%) expect to maintain staff numbers at current levels.”  

Interestingly, none said they planned to downsize, she said yesterday. “Though 16% said they expected to replace some roles with technology.”

 The roles expected to most in demand in 2020 are:

• Sales, equally with 
• Risk & compliance. This was followed by
• Customer / member engagement, and 
• Operations roles. 

Ms Humphris notes when hiring for these roles, cultural fit was considered the most important criteria by c-suite leaders, followed by proven experience and technical skills. Interestingly, there were no responses for qualifications or remuneration. 

Ms Humphris adds that technology was not solving the recruitment challenge in wealth management. “Job seekers are increasingly reporting being disheartened by the automation of recruitment in our industry. We are hearing an increasing number of complaints from skilled people applying for roles and not getting a response – even when they have all the skills and experience.

“At the other extreme, many of the HR departments in wealth management still base their decisions on gut instinct rather than facts!

“There needs to be a better balance by wealth management firms seeking staff. Algorithms and automation cannot substitute for someone who can identify and match proven performance, cultural fit, skills and personality traits with what wealth managers need.”

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Sally Humphris

Wealth managers and financial services organisations – such as ANZ, IOOF and NAB – that are working their way through the implications of the Royal Commission were told to start thinking differently regarding their leadership structures. 

IOOF, which is seeking a new CEO, revealed just this week that it will require the approval of the prudential regulator before its billion-dollar purchase of ANZ’s OnePath superannuation business can proceed.

Changes to organisational management are being implemented in order to better manage external and internal risks, conflicts of interests, and ensuring client best interests duty is met, notes industry people specialists SUPER Recruiters.  

Sally Humphris, Executive Director at SUPER Recruiters, says: “Organisations, like IOOF and others, may better manage internal and external business risks by appointing co-CEOs, a strategic leadership move businesses such as JP Morgan Chase have adopted. The co CEO structure has enabled business growth as well as ensuring best interests duty and reputation remain intact. 

“It is important to set the right culture from board level down. Boards appointing co-CEOs, one being a former regulator, bringing governance and compliance disciplines, and the other being a strong business leader, could overcome many of the reputational issues being faced by these organisations,” suggests Ms Humphris.

“This approach would provide a better start to help repair issues identified by the Royal Commission and also reputation by providing stakeholders with the peace of mind that an experienced regulatory professional was embedded within such organisations.”

Ms Humphris suggested that while the industry disclaims that past performance is not a guarantee of future performance, it often is when it comes to people. “These organisations need to engage proven performers. HR departments recognise that good people can make a big difference to their performance and culture.”

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Sally Humphris

The Dawson Partnership Remuneration Trends Survey canvasses a broad range of institutional and independently owned financial planning companies that are surveyed at the end of each financial year. One of the most notable results from the 2015 survey was the increase of 10% over the 2014 year in employer intentions to increase employee remuneration.

‘The 2015 Survey recorded an increased emphasis on employers ensuring that they’re offering market based remuneration with respondents wanting to reward employees who had performed well and also they believed that recruitment activity had increased in the first six months of the year and that they were aware that their best employees were being approached by competitors. Recruitment activity and a trend in remuneration increases were most notable in compliance/governance roles within advice businesses.’ Sally Humphris

The increase in recruitment activity reported by respondents is supported by our 2015 Hiring Intentions Survey which reported an increase in recruitment intentions by employers when they were interviewed in December 2014. The industry wide survey reported an increase of 8%, over the 2014 year and reflected the upswing in positive sentiment.

The primary reason given for the increase in remuneration by respondents was that their employees had met, or exceeded, their expectations and they wanted to reward them accordingly. Additionally, employers were aware that some of their best employees had been approached about other roles and that the remuneration increase was part of their employee retention strategy.

Specifically, in the aligned financial planner business model, an increase in remuneration (including bonuses) was sited principally from a growth in total funds under advice driven by the acquisition of individual financial planner practices, boosting remuneration in compliance and administration roles.

Those holding client service/ administration roles also fared well with increases in the range of 3-6%.

While salaried financial planners employed by institutions received at best CPI increases those employed by independent firms fared better, particularly those who contributed to the firm’s revenue growth with increases upward of 4%.

There was also an element of employers playing catch up where there was provision for employees who were identified as being paid below market or who had some stage during the year taken on additional responsibilities and there had been no adjustment to their remuneration. At the upper end these employees received increases in the range of 6%-10%.

Remuneration Trends Survey Results:

The Dawson Partnership 2014 survey found that:

• 13% of employers were looking to increase employee remuneration

• 71% of employers were looking at maintaining employee remuneration

• 11% of employers were looking to decrease employee remuneration
• 5% of employers were unsure

The Dawson Partnership 2015 survey found that:

• 23% of employers were looking to increase employee remuneration

• 66% of employers were looking at maintaining employee remuneration
• 5% of employers were looking to decrease employee remuneration

• 6% of employers were unsure.

Increasing existing employee remuneration:

Of those businesses in the 2015 survey that indicated their intention was to increase remuneration:

• 55% stated that the increase would be awarded to those employees who had met or exceeded their KPI’s
• 31% stated that the increase was primarily targeted at valued employees as a part of a retention strategy
• 14% stated that the increase was targeted at those employees that weren’t being paid market remuneration

Maintaining existing employee remuneration:

Of the 66% of respondents who stated that they would maintain employee numbers:

• 67% said they would do so to meet current and projected business targets and currently didn’t see there would be any change in their position in the 2015 year. However when asked if they would consider increasing remuneration levels if business conditions did improve beyond their current expectations 27% stated that they would consider it but only if they believed the improvement was sustainable.

• 33% stated that they were adopting a cautious approach to expenditure even though their businesses were experiencing increased business growth. 10% of these respondents expected this business growth to come from new and lower cost technology increasing productivity.

Decreasing employee remuneration

The 5% of respondents looking to decrease employee remuneration stated that this would be achieved by implementing cost reduction strategies including not replacing employees who leave their businesses and or replacing employees on lower level remuneration

Positive factors cited by respondents:

1. The improvement client sentiment
2. The growth in business profitability
3. Technology benefits with efficiency gains from compliance and reporting

Negative factors cited by respondents:

1. Continued volatility in investment markets and the flow on affect to sentiment
2. Further government changes to the legislative framework

‘We noted not only a positive change in sentiment of respondents in the 2015 Survey, but that there is more emphasis on remuneration being viewed as an employee retention strategy. While there isn’t a war for talent as was evidenced in the lead up to the GFC we are seeing an upward trend in recruitment activity and an awareness by financial planning businesses that to retain their employees they need ensure they are remunerated in line with the market or they will face the possibility of losing them’. Peter Dawson

Click here to read about the The Dawson Partnership 2015 Hiring Intentions Survey results.

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Sally Humphris

The results of The Dawson Partnership 2015 Hiring Intentions survey highlighted a marked turn-around and improvement in participant sentiment.

The 8% uplift in hiring intentions over the 2014 year is now being born out in the increased recruitment activity in a broad range of roles across the wealth management market.

The continued growth in head count numbers demonstrates that there is increased optimism amongst companies that have achieved, or exceeded their performance benchmarks over the last year. There is an inherent belief that now is the time to build on personnel infrastructure to both increase client service levels and build new business in existing and/ or new business channels.

While a proportion of new hires are opportunistic with employers targeting high quality personnel who have been dislodged from their previous employers, or have chosen to return from offshore postings, this talent pool is limited and will rapidly dry up unless there is another wave of expats returning home and/or a substantial increase redundancies.

Considering there has been a large influx of returnees in the last few years it would seem implausible that this will increase in momentum and considering that none of our respondents were looking to down size headcount, the initiation of substantial redundancy programs seem to be unlikely. Supply of quality talent is expected to dry up quickly.

Adding to the challenge for employers to secure the requisite candidates for their businesses is the reticence among candidates to move employer. Candidates are more conscious than ever that they need to protect their brand in the market place and scrutinise opportunities often in forensic detail.

Sally Humphris noted; ‘we are finding that candidates will undertake detailed due diligence on opportunities that are presented to them with increased scrutiny of the companies that include more than visiting the corporate website. More often than not, candidates will draw on their networks to make an informed decision about the company and the position itself and unless there is a compelling reason to move they will stay put’.

There can be a disconnect between the employers view of the available talent pool and reality and it may take some time for companies who view the market as awash with relevant candidates to recognise that this is not the case. To avoid spending an inordinate amount of time conducting ad hoc recruitment campaigns it is essential in this market to be more focused than ever on not only identifying who you want to recruit but ensuring candidates are carefully managed through the recruitment process. Hiring managers who don’t have strong recruitment skills and experience will increasingly find recruitment a frustrating and expensive experience and one that they’d wished they’d handed over to a professional recruiter.

There has been strong growth in hiring in investment managers that have increased funds inflow and profitability and we are seeing greater emphasis on the segmentation of positions along business channels. This is particularly evident in distribution where we are seeing a growing demand for specialists who are focused on a particular channel; the advent of the SMSF business development managers being, but one example.

Changes in technology are also having a marked impact on the distribution of investment management companies’ product offerings to the Direct (SMSF market). In particular we have seen the growth in employment opportunities in new disrupters, that is lower cost technology providers (e.g cloud based platforms and administration systems) accessing and servicing the superannuation funds member direct options and the direct SMSF market.

The risk insurance sector shows little sign of slowing. This year a number of companies will actually increase business written and grow their personnel headcount in line to meet service requirements. Advisers that are predominantly risk focused are quietly optimistic about the year ahead and product suppliers are working to enhance products and improve their services to advisers and their clients.

Advice businesses that are well managed and have established client bases along with diversified revenue streams are well placed particularly where the client base is at most moderately geared into the investment markets. While these businesses may not be looking at further recruitment activity at least until the new financial year they are not in a position where they are having to instigate redundancies and will be the first in line to recruit new staff.

Superannuation outsourcing has areas of personnel growth particularly with companies that have built significant market share over the last two to three years. There are a number of companies that have continued to recruit senior level candidates to bolster servicing and new business infrastructure and have further plans to increase headcount in the first quarter of this year.

Peter Dawson commented; ‘while the war for talent is more subdued than it has been in the past, companies are still sharpening their pencils offering competitive market remuneration to secure the high achievers for their businesses. There is however significant emphasis placed on making sure that the decision to hire the right candidate is supported with a rigorous approach to the recruitment process’.

Remuneration remains a pivotal issue in recruitment and while there has been little movement in salaries over the last year, companies continue to sweeten short and long term incentives. We will be able to provide you with further detail on remuneration trends when we release our annual Remuneration Survey in July.

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