You may have heard by now that there is a talent-squeeze in the wealth-management business. In fact, one quarter of recruitment openings for wealth managers could not be filled during the past year, according to PricewaterhouseCoopers' 2007 Global Private Banking/Wealth Management Survey, which calls these individuals client relationship managers. In addition, only 26 percent of CEOs claim to be very confident that they will be able to recruit enough client relationship managers over the next three years to support their growth plans and just 17 percent rate their current client relationship managers as having very high ability to manage the needs of their clients. The report says this talent squeeze will only get more intense. That is great news if you are a good wealth manager looking for a new gig -- bad news if you are running a firm.

There are a few things firms can—and must—do to mitigate this situation, according to PricewaterhouseCoopers. For one thing, they need to become better at building internal talent rather than relying on recruitment. They also need to track things like recruitment, training, pay and performance management (internally and at rival firms), and to create formal employee retention programs with emphasis on a great work environment.

Today, over two thirds of wealth-management firms plan to poach talent (particularly what they call client-relationship managers, or the guys who work with clients face-to-face) from other banks, according to the report. But that approach is simply not sustainable, the authors say. For one thing, some 70 percent of firms do not monitor their competitors’ training practices, and 69 percent do not monitor their rivals’ recruitment practices, the report says. More discouraging is the fact that 70 percent of the relationship managers responding to the survey believe only 10 percent or less of their colleagues are looking to leave a current position.

Meanwhile, training is a point of weakness for most firms: Only 39 percent of firms in the study strongly agreed that they were throwing sufficient resources at training programs that allow employees to meet high standards. Advisors are even less optimistic: Only 12 percent of relationship managers believe they are getting the training they need to meet high standards. The nice thing is, the three greatest weaknesses advisors have, according to business managers—lack of understanding of tax, regulatory change and products—could all be fixed with adequate training, the report notes.

As for retention, few firms have a formal program in place: only 43 percent. What’s more, those who do have them say the top two components of the programs, ranked in order of importance, are bonus and salary. That emphasis is at odds with what advisors say they want. When describing why they choose to stay at a particular organization, most wealth managers cite “relations with colleagues, corporate culture and career prospects,” the report says.

In fact, 83 percent of relationship managers said good relations with management was the chief reason they stayed at their employer, and another 53 percent said corporate ethos and culture. Among the top reasons wealth managers cited for leaving a firm were the need for a fresh challenge, and a lack of agreement with corporate strategy; compensation was third on that list.

“The survey results confirm the view that wealth managers must create exiting work environments, where CRMs feel motivated and challenged,” the authors note. “Our experience, however, is that many wealth managers—even the biggest—struggle with developing adequate career structures that do not simply result in CRMs [client- relationship managers] moving from client-facing roles to management positions.”

Still, for the most part, it looks like bigger is, in fact, better. When it comes to attracting and retaining talent, the biggest firms are at an advantage, the report says, because they have the resources to make substantial investments in some of these kinds of initiatives. “In an environment where talent management will be a key differentiator, the larger players are beginning to pull away from their competitors, and the advantage historically held by the niche players is being eroded.”