The Valley of Despair and the Exodus of Talent

June 19, 2012

In my June 14 post Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail? I examined the current trend of banks seeking greener post-Dodd Frank pastures by pursuing new wealth management initiatives.

In Ocean’s 14, I’m sure they’ll call this running a reverse Willie Sutton. Sutton, of course, was the man who robbed an estimated $2 million from banks and who apocryphally explained “because that’s where the money is”.

The top 1% hold 40% of the wealth, and banks need to find new sources of earnings… What could go wrong?


The Valley of Despair

Change management professionals often prepare organizations for the ‘valley of despair’ that usually follows the initial excitement that bubbles up when a change is announced. Anticipation and relief from the status quo typically give way to feelings of fear, threats, guilt and depression before acceptance and progress.

Similarly, Gartner coined the the term ‘hype cycle‘ and its similar ‘trough of disillusionment’ to describe the point where emerging technologies fail to deliver on their anticipated hype. (See my post Remember When Laptops Revolutionized Financial Services?.)

I suspect that many financial institutions that are currently so excited about the potential of the affluent, high net worth and ultra-high net worth segments are currently approaching the ‘peak of inflated expectations’, unaware of the rapid downward descent that awaits them on the other side. It’s not that those segments aren’t truly attractive. It’s that most organizations won’t be able to capitalize on the opportunity.

The Exodus of Talent

Readers of this blog know that I am a big believer in leveraging innovation and technology to enhance the advice provided by advisors to clients, but I am not among those who think that a better algorithm is all we need. Wealth management has been, and remains, a talent-driven business. This peak of inflated expectations comes with an often insatiable appetite for the ‘best and brightest’ talent.

There are already signs of firms rearming for another battle in the war for talent. Job postings in the wealth space are picking up. Headhunters are brushing off their cold-calling skills and smiling and dialing again. Consultants are preparing new decks full of advice.

At its worst, the war for talent becomes a mindless bidding war, and even the unproductive dolt down the hall swaggers in to dangle an unsolicited job offer in your face, nearly daring you to match it. If you feel threatened enough, and if you have not been treating talent management as the permanent part of your job that it is, you probably will match it.

At its best though, the market brings exciting new opportunities to bear and true talent, like capital, will flow to its most efficient use. And maybe the unproductive dolt down the hall will become someone else’s shiny new unproductive dolt for 30% more pay

Why Top Talent Leaves

So how do retain your top talent (even if you do lose a few dolts along the way)? Forbes had a great post this week on Why Top Talent Leaves: Top 10 Reasons Boiled Down to 1. The punchline is:

“Top talent leave an organization when they’re badly managed and the organization is confusing and uninspiring.”

The article goes on to describe two things to do to keep your best people:

1) Create an organization where those who manage others are hired for their ability to manage well, supported  to get even better at managing, and held accountable and rewarded for doing so.

2) Then be clear about what you’re trying to accomplish as an organization – not only in terms of financial goals, but in a more three-dimensional way. What’s your purpose; what do you aspire to bring to the world? What kind of a culture do you want to create in order to do that?  What will the organization look, feel and sound like if you’re embodying that mission and culture?  How will you measure success?  And then, once you’ve clarified your hoped-for future, consistently focus on keeping that vision top of mind and working together to achieve it.

I certainly agree with both of those recommendations, but I recommend starting with the first one. In this hype cycle, we are going to see a lot of high performing individual contributors become poor performing managers. Either because they aren’t really cut out for managing others, or because their organizations won’t support them in becoming the managers they need to be.


  1. JP – Good thoughts. Many organizations allow great talented individuals into the management ranks as a means to increase comp and provide recognition through a title. Many firms are guilty of this which I believe dilutes the quality management over the long run.

    The challenge: How do firms reward great “front line” professionals with comp and recognition by leveraging their strengths and not pushing them into management as a means to reward/recognize?

    Most HR departments have a very narrow framework in which management can operate when rewarding people … Sorry, Mr/Miss twenty something talented young man/woman, you can not get long term incentive because you are not a VP/SVP or do not manage any FTE. As that young talented professional grows in their career their respective management will be tempted to “force” them into management as a means to retain and reward them. This common practice may seriously dilute the joy factor of that professional and may ultimately evolve to a departure with that firm.

    I have ran across one firm that has addressed this issue: T. Rowe Price. This well know money manager has created a framework where their security analyst have the ability to make just as much money as the lead Sr. Portfolio Manager for that given strategy. The firm realized early on some professionals are simply better at being a “technology” analyst and providing great insight into security selection vs. becoming responsible for the portfolio construction of a given strategy.

    The benefit of this approach:
    Maximize the strengths of the individual
    Limit your talent turnover
    Deliver a better product

    While T.Rowe Price is not perfect it is recognized as one of the best and most successful money management firms in the nation.

    • Dave, thanks for your thoughtful comments. I agree! Kicking people upstairs to a management position simply to retain and/or reward them is a bad move for the employee and the rest of the organization. Ideally, everyone is given a chance to shine by playing to their own unique strengths.

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  4. […] of real value. In another post, JP wrote about Gartner‘s ‘hype cycle’ and the valley of despair (aka “Trough of Disillusionment”) as the gravity of reality pulls adopters from the […]

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