management Consulting > insights & AdviceThe Talent Management Dilemma: Eight Human Capital Challenges Advisory Firms Must Solve to Unlock Growth
For advisory firms seeking to grow their firms, there’s no shortage of opportunity. Client demand is increasing, service offerings are expanding, and digital transformation is accelerating access to new types of clients. However, despite these favorable conditions, many firms have hit a growth barrier, and not because of a lack of clients or strategy. The real constraint, more often than not, is people.
Human capital is one of the most persistent growth barriers advisory firms face as they become larger. More clients mean financial advisory firms must expand their capacity to serve new clients and implement more robust human capital solutions. And this requires a more focused talent management strategy.
However, at Herbers & Company we know that hiring processes, career tracks, and compensation strategies alone will not solve talent problems. Firms grow when they invest in building and implementing talent management systems that support their people. Without that infrastructure and dedication to ongoing management and implementation, growth becomes inconsistent, and in many cases, unsustainable.
Human capital management is the #1 growth barrier facing firms today. Yet human capital is the most underestimated as a growth lever, and often the most urgent to address. The following eight challenges represent the core issues firms must overcome if they want to grow intentionally and sustainably without having the burdens of high turnover, low productivity, and clients leaving along with talent.
Issue #1: Lack of Talent Management Systems
When firms hear “talent management systems,” their first thought is talent management software. But the most effective system isn’t tech, it’s a well-designed organizational strategy. In fact, organizational strategy is the talent management system that aligns your structure, roles, and leadership to support hiring, onboarding, and talent retention.
In early-stage firms, hiring often starts informally, recruiting someone familiar, training them loosely, and managing performance based on gut instinct. This may work with a small team, but it becomes unsustainable because it creates high management as the firm grows. Without a clear organizational strategy in place, talent gets spread too thin, capacity becomes mismanaged, and leadership begins making reactive decisions, such as hiring too many people, or not enough of the right people for the roles that truly matter.
An ineffective or absent organizational strategy leads to misalignment between people and priorities. Employees duplicate work, drop key client follow up work, or operate in silos, none of which supports efficient growth. Meanwhile, employee management becomes increasingly difficult. Leaders struggle to delegate, teams lose accountability, and engagement becomes harder to assess.
A strong organizational strategy defines how the business is structured, what roles are needed, and how each function contributes to the overall vision. It lays the foundation for career tracks, job descriptions, and illustrates how effective communication flows. When this structure is clear, hiring becomes intentional, rather than reactive. New hires are aligned to specific capacity needs, onboarding becomes consistent, and leaders can measure performance against core values.
Issue #2: Low Employee Engagement and Retention
One of the clearest indicators that a firm is facing a growth barrier is high employee turnover. However, the roots of that turnover typically go far deeper than compensation. Employees disengage when they lack clarity, recognition, and opportunities for input. In advisory firms, where success is highly dependent on relationship management and trust, the departure of even one high-performing employee can create a ripple effect.
Is your talent strategy driving growth, or holding it back?
The Talent Management Dilemma outlines eight hidden human capital challenges that can limit advisory firm success, and how to overcome them. Inside, you’ll find insights from Herbers & Company, plus an overview of how we can help you get started.
Structured employee engagement strategies are essential. Firms can begin with anonymous employee engagement questionnaires to uncover pain points across the organization and individually. Commonly cited issues include lack of upward mobility, limited team communication, and absence of peer recognition. Addressing these challenges with feedback loops, transparent goal setting, and training programs for employees leads to a measurable increase in morale and talent retention.
Issue #3: Underinvestment in Career Development
Growth-oriented professionals want to know where they’re headed. A lack of defined career paths is one of the most preventable causes of employee disengagement. Despite this, many organizations operate without formalized career tracks or structured training beyond basic continuing education.
Providing employees with clear career tracks, whether for client service, operations, or advisory roles, helps establish expectations and boosts motivation. Firms that layer on learning opportunities such as technical, behavioral, and relational training, mentorship programs, or next generation leadership coaching programs are better positioned to retain top talent and fill future leadership roles.
Issue #4: Absence of Succession Planning for Top Performers
Succession planning is often associated with retirement or equity transitions. But succession must also include key roles across the organization, not just ownership. When a seasoned operations manager, senior planner, or lead client service associate departs without a succession plan, firms can lose vital institutional knowledge and worse, disrupt client continuity.
Firms should identify mission-critical roles and assess who could step into them if needed. This process includes creating and cultivating talent pipelines, cross-training employees, and documenting key processes. Succession planning should be treated as an ongoing business function, not a crisis response triggered by resignation letters or simply a pathway to liquidity.
Issue #5: Inconsistent Leadership and Management
Promoting high performers to leadership roles is a natural step in a growing firm, but it often exposes a deeper issue: founders themselves were never taught how to lead. Many ineffective cultures aren’t the result of bad intentions or poor hires; they stem from a lack of leadership skills at the top. Without a clear understanding of how to lead within a growing business, even the most well-meaning leaders can create confusion, unnecessary conflict, and employee disengagement resulting in turnover.
Strong leadership requires far more than technical knowledge. It involves emotional intelligence, the ability to navigate conflict, delegate decisions appropriately, and guide others through periods of change and growth. These aren’t traits people are born with, they are skills that must be learned, practiced, and refined over time.
That’s why it’s essential for owners not only to invest in the next generation of leaders, but also in themselves. Working with consultants who specialize in business structure and executive coaching services within advisory firms can provide both the strategic frameworks and practical tools needed to lead more effectively. Firms that view leadership as a skill, not a personality trait, build cultures of trust.
Issue #6: Limited or Misaligned Incentive Programs
Incentives are powerful when aligned, and disruptive when they’re not. Yet when firms seek to solve performance or engagement issues, most owners instinctively look at compensation first. It's understandable. Pay is tangible, easy to adjust, and seems like the fastest path to change. But the effectiveness of any employee incentive program depends far more on the structure it’s built upon than the dollar amount attached to it.
The mistake many advisory firms make is building incentives around individual performance metrics, usually production, business development, or revenue generation, without evaluating whether those incentives align with the firm’s long-term goals. While this approach may drive short-term results, it often erodes long term client service, encourages siloed thinking, and creates internal competition that weakens the culture.
The best-laid employee incentive programs begin with strategy, not benchmarks. Before creating an incentive plan or consulting the latest benchmarks, firms could ask:
What behavior are we trying to incentivize?
How does that behavior support our strategic goals?
What roles contribute directly to the outcomes we are trying to achieve?
Answering those questions requires a deep evaluation of each position in the organizational strategy and on the career track. For example, an associate advisor on a career path to lead advisor should not be incentivized on new client acquisition if their current responsibilities are focused on financial plan creation and client meeting prep. Similarly, operations or client service professionals should be rewarded based on efficiency, client satisfaction, or team contribution, not profits they don't have any decision-making authority over.
Effective incentives are tied to firm-wide outcomes such as revenue, profitability, client retention, process efficiency, or quality of service. They can include cash bonuses, revenue or profit sharing, additional time off, flexible work arrangements, or professional development stipends. In smaller firms, even simple, non-monetary employee incentive plans can have a meaningful impact when they are clearly defined, aligned with values, and consistently applied.
Keys to Communicating Employee Incentive Programs Effectively
Clearly explain to employees what behaviors are rewarded
Tie incentives to firm-wide objectives to promote unity
Involve team leaders in shaping the incentive structure
Ensure employees understand how they can influence results
Reinforce messaging in onboarding, reviews, and team meetings
Review and update programs annually, as your goals evolve
Issue #7: Lack of Formalized Training Programs
As firms get larger, inconsistency in training becomes a major source of inefficiency. New hires may receive different onboarding experiences depending on who trains them. Existing employees may rely on outdated processes or unspoken knowledge. This lack of alignment creates significant brand risk, especially in a compliance-heavy industry.
Formal corporate training programs ensure that everyone in the organization has access to the same knowledge, expectations, and tools. These programs should include a standardized onboarding curriculum, ongoing education modules, and a central resource library. Firms that invest in training not only boost performance but also create a learning culture that adapts as the business evolves.
Issue #8: Misalignment in Talent Management Software
Technology is often introduced as an employee engagement tool, but the wrong technology can be counterproductive and can send the wrong message about the culture you’re trying to build. Many firms adopt HR platforms that are generic or mismatched with advisory firm core values. These systems often fail to integrate with CRM tools, lack customization, and produce reports that are irrelevant to a professional services-based business, such as financial advice.
For smaller and mid-sized firms, partnering with a Professional Employer Organization (PEO), such as TriNet or Insperity, can be one of the most effective ways to streamline HR and compliance functions. PEOs offer access to robust benefits packages, payroll systems, and regulatory support that extends capabilities well beyond the firm’s size, helping you stay competitive with larger firms.
For larger firms, it’s essential to take a strategic approach to HR as the organization grows. An effective talent management platform should mirror the firm’s structure, support both advisor and non-advisor roles, and integrate seamlessly with compliance systems, payroll, and operations. To remain aligned with growth objectives, firms should review their software stack annually, ensuring it supports, not hinders, employee engagement.
How Human Capital Consulting Can Be Used As a Growth Lever
Herbers & Company’s consulting experience reveals a consistent truth: firms with people-first cultures are the ones that succeed in client-first, fiduciary-led environments. While many advisory firm leaders naturally concentrate on business development, branding, or launching new service models, the ones who achieve lasting success are those who understand that their ability to hire, develop, and lead exceptional teams is the foundation of growth.
From designing organizational structures and building role-specific career tracks, to training leadership teams and implementing compensation strategies, our consulting services are custom to meet the real needs of advisory firms at each stage of growth.
