A strong employee value proposition is shown to increase employee commitment and decrease annual staff turnover.
The fundamental shifts in the Wealth industry are a double-edged sword for advice businesses. On one hand, many competitors have left the industry resulting in thousands of clients seeking a new adviser from a smaller pool. On the other hand, the labour market is the most challenging it’s been for a long time and therefore lacks a strong pipeline of new advisers entering the industry.
These macro trends are outside anyone’s control. But in this environment, the factors that are in your control are more important than ever, and they can be recapitulated in an employee value proposition (EVP).
A purposeful and articulate EVP can increase the commitment of your new team members by up to 50%. It can also reduce the compensation premium by 50% and increase your labour market penetration by 50%. Plus, it can decrease annual employee turnover by about 70% (Gartner)1. These are some statistics that even the busiest of business owners can’t ignore.
See reference 2
Many firms that Macquarie’s Virtual Adviser Network (VAN) have worked with are certainly aware of the benefits of having an EVP, but find it difficult to prioritise, design or implement. So, we wanted to break that down to ensure that you have the best chance at creating an EVP that showcases the true heart of your firm.
There are many ways to think about the components of your EVP, but we have found the Mercer3 EVP Triangle an easy and digestible way to break down the five pieces to consider, noting that culture/cultural alignment is represented by the grey outline as it really is all encompassing and not really a stand-alone factor.
There are very few firms, if any, that Macquarie VAN sees deliberately delivering all five components to the best of their ability. Several of the attributes of a successful EVP run counter to traditional practices and entrenched behaviours in many businesses in our industry. Some components are complex and can be expensive to implement. Almost all require leaders to meticulously balance competing interests and to rethink how they divide their time and attention.
We present our learnings, therefore, as a challenge to you: an agenda for leaders and firms that aim to create the most engaging and inspiring EVP possible. Let’s break down the five components.
From managed portfolios to managed goals
The use of managed accounts accelerated in 2020, with the proportion of financial planners using them for client investments doubling since 2016.
A joint State Street Global Advisors (SSGA)-Investment Trends 2021 Managed Accounts Report found that, based on a survey conducted from December 2020 to February 2021, of those who used managed accounts, 83% said it has strengthened their client value proposition, and 81% believed it was easier to demonstrate client best interests duty than with direct shares or managed funds.
The report also included the following findings regarding how users’ client value proposition had changed as a result of adopting managed accounts:
- Greater focus on client financial and lifestyle goals: 39%
- Outsourcing portfolio construction to professionals: 36%
- Greater focus on educating clients as a financial mentor: 35%
- Distanced value proposition from investment returns: 29%
- Greater transparency: 38%
- Cost-effective investing: 32%
- More communications/improved availability: 26%
- Tax-effective investing: 18%
- Service more tailored to individual client needs: 27%
- Providing a broader range of products and services: 23%
- Other: 30%
- N/A, no change: 15%
Macquarie’s Virtual Adviser Network research into high-performing advice firms identified that clients perceive their experience with any business through three lenses: success, effort and emotion. Can they achieve the outcome they want, how easy is it to do so, and how does it make them feel? With greater visibility over their holdings, managed accounts can make investors feel confident and reassured. Further, by freeing up adviser time and reducing the Record of Advice (RoA) paperwork requirements on both advisers and clients, it is simpler to achieve the right investment outcomes.
“We see managed accounts deliver superior portfolio outcomes for the majority of clients—consistently—over three to four years and beyond,” Vincent O’Neill, chief executive of Stanford Brown said.
His firm began using managed accounts four years ago, and recently added Stanford Brown’s separately managed accounts (SMAs) to the Macquarie Wrap platform to provide greater choice and flexibility to clients.
“I think in our industry there is a misconception that technology like robo-advice is a threat,” O’Neill explained. “But we see technology—including managed accounts—as the perfect complement to our high-touch, high-engagement model. It’s a way to deliver a superior service more efficiently, while also managing the compliance for rebalancing portfolios.”
Let us take a closer look at how managed accounts help similar firms provide an experience defined by both consistency and customisation, at scale.
1. Compensation
Remuneration is a great starting point for thinking about your EVP. A firm that pays its employees in line with a structured pay philosophy that aligns both the people working in the business and the purpose of the firm, ensures that there is a positive perception of the business right from the beginning. Think high growth firm that rewards new business acquisition accordingly, or a business focused solely on providing a high touch client model and offers compensation in line with delivering on that promise.
It is important to note that a high level of remuneration alone cannot make up for a working environment that doesn’t match an employees’ personal values, goals, and aspirations. Therefore, compensation models, including how you structure your bonuses and/or equity are simply a hygiene factor, but still a foundational component of your offer to the best employees.
2. Benefits
Lots of firms offer employee benefits, and lots of employees now expect them. Most people in today’s market are looking at their entire package rather than just the raw dollars. This means that they are actively reflecting on what is important to them. In a recent study by SEEK, 33% employees cited work-life balance as the most important benefit when choosing a company to work for4.
The number of benefits that could be and are frequently made available to employees are plentiful. This means there should be a rigorous process around how to make available the best ones, the ones your employees will value most of all. However, we see firms making the decisions alone on what to offer rather than taking the time to include their teams in the decision making.
The best firms go to great lengths to draw out, understand and support personal interests and values and build their benefits packages around that.
3. Careers
How good are the career opportunities and promotion prospects in your firm? Is it something you have even considered? And if you have, have you documented it to show to current and future employees?
Career pathing can help engage and retain your team because it shows people their opportunities for growth within the firm. Employees who don’t see clear growth potential in the business will ultimately turn to opportunities elsewhere. It is important to note that these growth opportunities don’t necessarily always need to be a step up in role title or change of responsibilities, they just need to provide an active emphasis of a team members’ continued contribution and desire for personal and professional growth within the firm.
If you're not part of your employees’ career planning conversations, then your business may not be part of their future. Having well-defined career paths and purposeful conversations around this allows you to gauge the areas of interest and development that your employees are seeking, whilst giving you the opportunity to provide clarity on how you can help employees on their journey. If they can't see that path with your business, they'll look for it elsewhere.
4. Wellbeing
Successful firms are prioritising health and wellbeing for their employees, both at home and at work. They are integrating wellbeing into their organisational culture, with an intense focus on how their employees’ feel as human beings rather than as purely productivity machines.
The traditional workplace is changing. No longer are programs that focus solely on physical wellness viewed as an effective solution to employee wellbeing. The shift to a more holistic approach with a focus on overall wellbeing that considers all aspects of employees’ lives is becoming more commonplace. These successful firms are driving our industry toward this inclusive practice with the move to integrate elements associated with overall health - physical, mental, social, emotional, and financial into tangible benefits, regular conversations, and consistent considerations.
5. Purpose
People want to be a part of something bigger than themselves, something they can believe in, and it is becoming a need of employees that they share beliefs and values with their place of work. But shared meaning is about more than satisfying your firms’ mission statement; it’s about establishing and preserving compelling connections between your employees’ personal values and your firms’ values. So, if you’re currently applying traditional economic logic to your business, i.e., you view your employees as self-interested commodities and design your business practices and culture accordingly, you may achieve a decent level of success, but you will hit a ceiling at some point. However, if you can align your firm with an authentic higher purpose that overlaps with your firms’ goals that assists in guiding your business decisions, your team will explore new ways of doing things, move into deep learning, take calculated risks, and make new and surprising contributions to take your firm to new heights.
This is quite an all-encompassing goal, and it is easy to get lost in how to implement in the day to day. So, it helps to know that employees seek to derive meaning from their daily activities, all their activities, and this desire can’t be achieved in simply through job enrichment add-ons. It requires nothing less than a deliberate reconsideration of the tasks each person is performing. Do those activities make sense? What are they contributing to? Are they as engaging as they can be? This is a huge, complex undertaking but ultimately one that will serve the greatest ROI for employee satisfaction, engagement, and retention.
There are no shortcuts to creating, implementing, and promoting a successful Employer Value Proposition. It’s work that takes time and as your business grows and evolves, your EVP will need to be updated to remain relevant and enticing. It must be authentic and rooted in deliberate, tangible things to create the kind of bottom-line impact mentioned earlier. But it’s the kind of deliberate focus that sets great firms apart and makes them truly attractive to the right talent. In other words, it is well worth the time and effort.
To learn more about the VAN Build for the Future program, visit macquarie.com.au/van
