How important is it for financial advisors to understand the economic and social impact of great resignations? The importance of this turbulent labor force disruption is validated by its 2021 entry in Wikipedia and the 10 million Google hits for that phrase. More than 40 million Americans will quit their jobs in 2021. Some employers are so desperate for employees, they are advertising “apply today, work today, get paid today”.
The resignation wave was highest in the 30-45 age group, primarily in the tech and health care industries. But the dropout demographic trend changed as 2021 progressed, and is likely to change further over time; Figures for October 2021 indicated that hospitality and food services employees were most likely to quit in that month, and more than 3 million workers over the age of 55 retired permanently.
We shouldn’t be surprised that even financial advisors feel the allure of resignation. Some financial advisors are undoubtedly leaving for personal reasons, and others due to a decrease in revenue and increased demands from clients who have joined in great resignation.
Advisors who remain on board face two major challenges when advising a client to consider or actually leave a job/career: reconsidering financial advice and financial plans, and non-committal. Growing need for financial coaching and mentoring. Successfully meeting these challenges will alienate mentors who do not succeed.
Financial advice and review of financial plans
The impact of clients’ resignations on their financial plans and life plans depends on their vision for the future. It’s one thing to leave it because a client has a new job, or is anticipated to happen quickly. Leaving for extended periods is another thing. Also, advising a client who quit at age 35 would require a very different plan than advising a client who quit a few years before receiving Social Security.
Ultimately, great resignations require financial planners to hit a moving target. Financial plans reflect a time horizon and assumptions about a projected income stream. A client who quits takes a serious test of these assumptions. If no new jobs are in line, a new financial plan is important. The original plan was created assuming a salary trajectory based on a job that no longer exists. A new job may come with a new salary (higher or lower), different employer-proposed retirement plans, new medical benefits, and a different career ladder. A client may believe that a new and better job is near, but the job market can change rapidly, leaving the client unemployed or unemployed for longer than expected.
Even more attention should be paid to clients who quit their jobs and had no intention of ever returning to the workforce. These clients should plan to finance a desired lifestyle, and if there are years away from Social Security, they should also plan to finance medical expenses.
Increased need for coaches and mentors
Although the specific reason people leave a job varies, we feel confident in the following generalizations. The trauma of the COVID-19 pandemic brought to the fore issues of quality of life and work balance. Many are raising questions of purposeful living that they may not have raised before, and for many the answer is to climb down the corporate ladder.
More than ever, financial advisors will deal with psychological and spiritual issues such as personal fulfillment and purposeful living. Some advisors will feel comfortable doing this, others will not. Those who feel unqualified and/or uncomfortable with coaching and mentoring can still provide a valuable service to their clients. Competent referrals to accredited and verified life coaches will ultimately enhance the credibility of the advisor and strengthen the bond with the client.
Great resignations are a reality, as financial advisors need to adapt their perceptions and perspectives. Consultants must address financial matters while listening sympathetically to facilitate and fully understand the life journey of their clients.
David Dubofsky, PhD, and Lyle Sussman, PhD are both speakers, authors, consultants and retired academics.