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Using AI to bridge the RIA talent gap
Using AI to bridge the RIA talent gap
Melissa Banigan | November 19, 2018
The talent gap is real.
In fact, we're standing at the precipice of the worst talent shortage since 2007. Left unchecked, this shortage could create a global deficit of 85.2 million unfilled jobs by 2030. The financial and business services industry is among the industries facing the largest shortage (10.7 million jobs), and registered independent advisors (RIAs) aren't exempt from the problem.
In fact, the advisory industry is losing between 3,000 to 4,000 financial advisors every year. Part of the reason this is happening is fairly obvious — age. The average age of a financial advisor is over 50 and about a third of all advisors will retire over the next 10 years.
There are other reasons, too. RIAs don't have a large enough presence on college campuses, meaning fewer students—particularly women and minorities—are training to replace advisors who have aged out.
Artificial intelligence might be a way forward.
Traditional methods don't work
Another reason for the RIA talent gap is that traditional recruiting methods no longer work. Traditionally, human recruiters have pored painstakingly over applications, sifting through them one by one to find the cream of the crop. It's a laborious process.
Human hiring managers also bring their unconscious biases to the table, discriminating based on gender, skin color, age and other factors, including the perceived likability of a candidate. This means that despite being in the middle of a talent shortage, traditional recruiters decrease the pool of qualified candidates.
Almost 90 percent of CEOs in financial services think that increasing talent diversity in their companies would in turn increase their ability to attract more talent, and for good reason: diversity is good for business. In fact, the more diverse an RIA firm, the more likely it is to have higher-than-average financial returns. Yet with nearly a third of advisors not having a clear understanding of their firms' diversity programs or policies, increasing diversity feels like an uphill battle.
The lack of qualified talent and poor recruitment strategies have left a disconnect between the needs of the industry and the talent they need to hire, and some advisory firms are even hiring from outside of the industry or poaching top-level financial advisors from competitors. These solutions don't address the diversity issue, though — and artificial intelligence, or AI, can help.
Bridging the talent gap by increasing diversity
Using AI to recruit new RIAs can help mimic some of recruiters' easiest tasks, such as locating resumes of qualified candidates. Bonus? They do so in record time. Using data and algorithms, AI programs not only sort through resumes quickly, but they can leave out information such as race, age, and gender so that candidates are judged solely on their experience. These programs function by omitting various keywords that could contribute to unconscious bias.
In fact, sometimes resumes aren't weighed at all, as algorithms screen holistically by focusing on a candidate's soft skills, like empathy, politeness, and attention to detail. Many of these programs work by assessing applicants as they work through cognitive and emotional tasks on computers. One hiring platform, Pymetrics, which assists companies such as Tesla and LinkedIn, reports that by using their methods, 18 percent more women and 16 percent more minorities are hired.
RIAs who want to come out on top during the talent shortage will not only need to tackle their diversity and inclusion policies, but they'll also want to consider incorporating AI technology into their recruiting programs to increase the health, growth, and profitability of their firms.
TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/ SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2018 TD Ameritrade.