How do you cut costs AND recruit/retain the best + brightest finance talent?
Jonathan A. Schein of RELPI, and MUFG Investor Services’ Steven Boydstun and Scott Ramsey discuss how top companies efficiently recruit and retain the best financial talent amid an unprecedented accountant and compliance crunch. These leading experts in venture capital and private equity share the proven tactics of top companies that will help you succeed.
Thank you for joining us. I’m Jonathan Schein, CEO and executive director of the Real Estate Limited partner Institute. Today we’re going to be talking about events that have moved rather quickly over the last week with the collapse of Silicon Valley Bank and Signature Bank and who knows what else is in store.
These events bring us not only intrinsic pain but also corporate pain. We’re trying to work things out. There’s more work to do. But there are fewer accountants. So many of them are working into the late hours of the morning. They’re missing family dinners. Their families are sacrificing so much. There are missed deadlines and failures. For example, Bloomberg wrote that the accounting shortage threatens capitalism’s future. Given the events of the last week, you can see how you could use more accountants that know what they’re doing.
In the last two years alone, more than 300,000 accountants have left their jobs in the United States. College grads, accounting majors included, are increasingly reluctant to sign up for accounting jobs. The Big Four firms with deep pockets and aggressive recruiting practices are feeling the crunch. Accountants coming out of college are down nearly 9 percent in 2020 compared to 2012. Accounting talent seems to be trapped in a cycle of diminishing returns. That’s having an outside effect on private markets. So what’s the solution?
Why don’t we talk to Steven Boydstun, president of MUFG Investor Services, and Scott Ramsey, head of markets and client relationships at MUFG? It is a 300-year-old banking institution. What are the smartest GPs doing? What are you doing at MUFG?
The tides are changing. Our clients are behaving appropriately in reaction to a volatile market. We continue to have uncertainty, now closer to home than ever, with the events of the last business week. That’s very close to home – and the financial sector, of course – for our clients. We continue to keep an eye on international conflicts. Everybody’s looking at inflation. We’re looking at changes to valuations. Our clients are smart, some of the smartest folks in the private markets. They’re adapting.
But you have a shortage of available talent available resources in the market. What do you do? We’re seeing consolidation within the smartest asset managers. They’re prioritizing their core competency as investment managers, focusing on front-of-house investment minds, and perhaps not so much on operations, fund operations, and technology. That’s music to our ears. That’s who we are. That’s what we do. The markets are greatly pushing in that direction. The top folks are not going to investment shops as much these days as they were when we were young. So many folks are going to technology shops. They want to make the next AI. They want to go into cryptocurrency. They want to do those sorts of things. It’s a big, big trend.
Well, you’d almost think that some of these old-school professionals have a lot of opportunities to excel at this point because we know what happens when there are tech and financial meltdowns. There always needs to be someone there to pick up the pieces.
why? One of the latest private market surveys suggested that the answer supports what I just talked about regarding focusing on core competencies. From leading asset managers to partners, they’re outsourcing. They’re looking for solution providers. They’re looking for logical partners, dependable partners, with deep benches.
What you’re saying is there’s a flight to quality. So I’d like to bring Steven into this conversation as well.
The premise is spot on. Our GPs are, of course, reacting to the changes in the industry. In general, our clients are very good about adapting and working across their funds as standard practice. In the administration business and MUFG, we’re developing a team or culture that has the same sort of standards. The great GPs are creative. They need partners that are not going to be stuck in the headlights. They need those partners to be creative. That doesn’t align with traditional admin models where you commoditize a service – “Just checking this box will give you a standardized pricing set.” Those are great from a scale perspective. Those are super, but they don’t adapt to scope change as well. And that’s what our partners are doing. They’re constantly adapting.
We focus on the solutions. Solutions require talent. The market has changed as to talent, including the ability to handle it remotely. Also, working as an asset manager may become less attractive in this in this market. Working in public accounting might become less attractive in this market. So we’re very creative about pulling them in and providing the tools that commoditize service to give you scale. You need to work on the tools with the talent, designing the systems, processes, and practices around each client.
The traditional HR stuff today is table stakes. That’s great. But we need to think outside the box as well. We’re looking at adopting practices from other industries, industries that are used to rapid change. Remember, accounting as a profession used to be very solid. You come to work; you pull the lever; you do the work. Now it’s becoming much more dynamic, especially in our space. Other industries that have been in this mode for some time can bring a lot to it. We’re looking at bringing in talent from a diverse industry background, not just specifically private equity or real estate but other industries.
That is core to our go-to-market strategy. These tenets are core to our five-year outlook. It’s the evolving role of the admin in the investment landscape. It’s not just accounting. It’s being a consultative partner across complex fund operations and dynamically evolved structures. It’s not just the 30-year-old, closed-end fund that we’d seen for so long. It’s highly complex structures to meet the evolving needs of today’s investors.
Steven, you brought up something quite interesting. You talked about corporate culture, and how important that is, certainly at MUFG. Things have changed in our marketplace a lot. Many people feel that corporate culture is built within the office in the office environment. But, certainly, a lot of the young people coming out of these accounting programs and universities, whether they’re accountants or finance majors, don’t feel that way. How is MUFG differentiating itself in terms of corporate culture?
Being in a remote-first environment is important to us. We’ve branched out. Thirty percent of our folks are outside our original area. We’re grabbing a bunch of talent that has the solutions that our clients lean into. They work online. They shop online. I don’t think anybody in the market today can talk about work-life balance in the same way that we used to talk about it, which is coming to the office and going home at a certain time. Now the boundaries are kind of blurred. How do we establish that? How do we work through that so employees maximize their utility as people at the same time they’re working with the clients?
The core of what we’re talking about is building relationships with our clients – not just a third-party relationship, but one where we’re working actively with them.
Everybody talks about turnover. In this market, we have to plan for it. It’s resiliency planning. We’re looking at rotation practices in industrial contexts, moving people through, and gaining expertise. Your teams are building their careers by seeing all the different parts of the capital stack, and all the different challenges.
There’s a book called “Time, Talent, and Energy” by Michael Mankins and Eric Garton. It says everybody has about 15 percent of their firm who are the key players. They’re the ones that are going everywhere. But only the firms that put those folks where they are the most valuable are the ones that take advantage of those key players. Rotation comes from engineering culture. As we rolled it out, it became a real advantage. There are challenges, namely discussing changes with your client. But it allows us to keep some very, very talented people, build great careers, and provide great service to the GPs.
Scott, there were a couple of things that we discussed earlier, such as peak accounting. Why don’t you give us a little rundown of that and explain how that flows into consolidation?
It’s been written about pretty much in every major outlet that we can point a stick at – the Financial Times, the Wall Street Journal. Choose a publication. They’ve all written about peak accounting.
There are lots of forces at work that are driving career choices in a way that’s creating hardships for our market. You focus on core competencies, as we’ve talked about. We’re seeing our clients and the asset managers put a premium and intense focus on their core competency of investment management, attracting investment dollars at the front-of-the-house, front-office type of things. You need to figure out how you’re going to stop your fund operations; how you’re going to stop your technology, strategy, technology execution, and custom solutions; and who is going to be your resource who understand the needs of your investors, the unique needs of your fund and liaise with your other third parties – tax, securities counsel, auditors, etc. When we talk about the evolving focus of firms and how human resources are related, it’s scarcity driving a consolidation of focus. It’s forcing service providers like MUFG to do the same thing.
Steven just talked about a culture built around talent acquisition and retention. The amount of effort that senior leadership spends thinking, planning, inventing new strategies, grabbing the best from other industries, and trying to find the right cultural fit for our employees has doubled in my time here. We are so thoughtful and so conscious of the talent squeeze. I think it’s paying dividends. We are consolidating our focus, really to talent management, to be that excellent partner to fill the gap that’s growing in the market.
I’m a technologist at heart. When you think about technology in the admin space, that’s what we’ve designed around our talent. Technology is not going to replace our talent. AI, machine learning, and other tools will help me enable a culture of work-life balance. Focusing on those tools, and getting participation with those tools as we develop and reimagine the next five years and create a culture of collaboration and communication is very important. Technology evolves very quickly. Our staff adopts technology very quickly. Those are the models that are going to win. Those are the models that are going to attract talent who wants to feel like they can control their environment, provide a service and – let’s face it – be part of the best industry on the planet.
At MUFG, we’re focusing on the appropriate adoption of next-horizon technologies. Our focus is to be a great partner today. But we’re investing and we’re working very hard. The role of fund administrators is evolving role. It’s very consultative, so we need this broad talent base, we need broad experience because the needs of the GP are changing right before our eyes.
Someone once said, “Train people well enough so they can leave and treat them well enough so they don’t want to serve Richard Branson.” That’s a heavy weight for all of us. But here’s a question. You may not be able to name them, but at this point on shifting from closed to open, are there examples of GPs you can describe who’ve pulled that off despite the talent squeeze?
We’ve developed a bit of a specialty in this. We have a large staff. We have hundreds and hundreds of well-tenured accountants that look after these unique structures, across strategies, for our clients. We so often heard a GP saying, “I don’t know how to do this. We have never done it before. I’m hesitant to hire a massive staff for something where perhaps either the CFO or CEO doesn’t have a strong background.” The natural thing to do is partner with an expert. So we have a very strong track record to provide best practices.
How does it work? What is the structure? What is the reporting cycle? How is this capital activity different? How do I communicate with my investors differently or at all? We’ll partner along with the securities counsel and tax counsel to make sure that you’ve got an appropriate solution that you can depend on and lean into with integrity as you go out and try to source additional investment dollars.
It gets back to the culture of solutions. We have tons of expertise, but our clients are going to go into places that nobody’s ever been. That’s their goal. They’ll put it together and build that relationship with a client. It’s more about the relationship than the service because the service is going to adapt around the relationship. We see it throughout the organization as we start to face these things. Can we adapt to these things hitting both domestically and internationally or work through challenges as the market sways and changes? We figure it out. We can bring a lot of talent to sway on those sorts of solutions and work them out. When you’re doing that, you’re building your relationship, a long-term relationship that’s going to be there in five years.
This last week was an absolute nightmare for so many people in this market. We had people reaching out to our clients and saying, “Are you okay, do you need help? What can we do above and beyond our staff?” They have these intimate relationships with their counterparts at these asset managers. They care. That’s the core of the relationship. It’s trust and care. We are so proud of our staff. We’re bending over backward from a grassroots perspective – the day-to-day folks who work together on specific client engagements as well as top-down. We’ve been very responsible and forward communicators.
We are not overexposed. We are a safe, secure financial institution ourselves. We’re here for you when things are tough. We’re here for you when you have anxiety or your investors have anxiety. We’re going to do everything we can to help. We had folks working around the clock over the weekend to try to allay some of those fears.
Scott, have you heard of any GPs out there stress-testing their teams or partners ahead of turbulence or doing post-crisis postmortems?
The senior management within both GPS and LPs are getting together on a daily basis today. Right now, the issue is what’s the exposure to regional banks? What sort of allocation do we have there on a deposit basis? These things are going to continue. They’re going to continue for a while until markets settle down. That’s appropriate behavior. We’re going to continue to have our focus ratcheted up and be on high alert.
This staff cares. They’re trying to look around corners – that’s what stress testing is – to see what could happen. It’s a solution-oriented prospect. I think we’re suited to do this. It’s usually on a client-by-client basis based on their fears about their particular exposure to the current crisis.
Thank you, Steven and Scott. On behalf of MUFG, we’d like to thank you for participating and spending time with us.