In a recent panel discussion, the CEO of Cresset Capital, Susie Cranston, highlighted an intriguing talent shortage within the wealth management industry. Her focus was on the adjacent services that support high-net-worth individuals, specifically taxes and accounting. This shortage, she believes, is a critical issue that warrants our attention.
The Talent Gap in Accounting and Taxes
Cranston referenced a McKinsey study predicting a shortage of 100,000 advisors by 2034. However, she delved deeper, pointing out the declining graduation rates in accounting schools and the decreasing number of people passing CPA exams. This trend, she argues, will create a significant talent gap in the services that high-net-worth individuals rely on.
AI's Impact on Professional Training
The advancement of artificial intelligence (AI) is another factor Cranston believes will exacerbate this talent shortage. AI is eroding the traditional training grounds for tax and accounting professionals, which could have serious implications for family offices and their clients. Despite this, Cranston doesn't foresee AI completely replacing humans in the ultra-high-net-worth space. She predicts a shortage of experienced talent, which could give larger, scaled players an advantage in the market.
The Growing Need for Complex Wealth Services
Other RIA leaders on the panel agreed with Cranston's assessment. They highlighted the increasing demand for complex wealth services to serve higher-net-worth families across generations. This trend is evident in the recent announcements of dedicated family office divisions and acquisitions by RIAs. Larry Restieri, CEO of Hightower, suggested that the need for more complex services might even puncture the narrative that AI can replace human advisors. He believes clients are paying for the advisor's emotional quotient (EQ) and expertise, which AI cannot replicate.
The Breakaway Client Movement
Shirl Penney, CEO of Dynasty, brought up an interesting point about the 'breakaway client' movement. He argued that this movement is four times bigger than the 'breakaway advisor' movement, which is often the focus of financial advisor press. Penney believes the press has overlooked the significant growth in assets moving from bank brokerage accounts to the independent space, largely driven by clients breaking away from traditional channels.
Private Credit and Market Volatility
The panel also discussed global market volatility and the role of private credit. Lindsay Rosner, head of multi-sector investing for Goldman Sachs, emphasized the stability of private credit and noted that even in sectors like software exposure, where AI advancements have caused concern, these investments do not affect the entire asset class. She stressed the importance of diversification and understanding the liquidity of different asset classes.
In conclusion, the panel's discussion highlights the evolving landscape of wealth management. The talent shortage in adjacent services, the impact of AI, the growing demand for complex wealth services, and the overlooked breakaway client movement all point to a dynamic and changing industry. As we navigate these shifts, it's crucial to stay informed and adapt to the evolving needs of high-net-worth individuals.
