Wealth management firms have almost doubled what they spend on technology during the past two years, according to the consultancy F2 Strategy. Perhaps more of that money should have been earmarked for compensation.
Executives at RIAs and other wealth managers say their companies have received a meaningful uptick in resignations from their technology professionals, according to an F2 Strategy report, and the reasons are straightforward.
Out of 33 executives and other decision makers at some of the largest wealth managers surveyed by F2 Strategy, a third of them reported an increase in resignations. When asked why tech employees were departing, all of them cited more competitive compensation packages elsewhere and 50 percent said employees left for a promotion or better career advancement. Some also said employees left for a remote or more flexible work environment.
According to the report, location and company size did not impact the results. Big and small companies in large cities struggled to retain talent just like ones in other locations.
F2 Strategy periodically surveys a working group of about 85 wealth management CEOs, CTOs, and other C-suite executives or decision-makers. The consultant does not disclose specific members of the invitation-only group but says their companies collectively manage more than $4 trillion in assets.
In a tight labor market, and during a time when hiring software developers is especially competitive, wealth managers are finding themselves up against their usual peers as well as other types of companies, including those in Silicon Valley.
“The competition for tech talent in wealth [management] isn't, anymore, coming from other wealth management firms, it's coming from outside the industry,” Doug Fritz, founder and CEO of F2 Strategy, told RIA Intel.
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Most of the resignations are coming from top engineering roles, Fritz said. However, the competition for new graduates is also stiff. One executive from F2 Strategy’s cohort told Fritz his company hired a software engineer who recently graduated. A few days later, the new hire rescinded the agreement because a competing company offered him a job with double the salary.
“Tech companies are paying insane amounts of money for these people, and banks [and other wealth management firms] just can't compete,” Fritz said. Smaller firms might struggle to meet rising salary demands, Fritz added.
Wealth management firms are spending more on technology; 84 percent of firms surveyed by F2 Strategy have increased tech resources over the past two years and 78 percent plan to spend even more over the coming two years. Those resources are also used to adjust compensation packages — 61 percent of firms have developed strategies to mitigate attrition.
But a third factor is luring employees to certain companies, too. Firms need to make sure that technology hires are emotionally and intellectually engaged, Fritz said.
“[Technology people] are very creative. If you put them in a room with a single line of code and they go watch that code for 20 years, they're gone. I don’t care how much you spend on them,” Fritz said.
Companies need to train employees on new technologies and create internal career paths for them, otherwise they won’t feel professionally fulfilled. Some smaller firms might not be able to pay as well as larger ones, but they can offer employees an opportunity to have multiple responsibilities and make a significant impact on an organization, according to Fritz.
Holly Deaton (@HollyLDeaton) is a staff writer at RIA Intel and based in New York City.