‘Financial reset’ affects professional services
With one of my not-for-profit clients, I am working with two interns, both college graduates, working for $10 an hour — just to be doing something. This is a very difficult time to be matriculating. My son, another of the freshly minted college grads, has three part-time jobs that add up to one full-time job, albeit with no benefits. Alas, he has two job offers after Labor Day, but most of his classmates do not. Many are choosing to go on to graduate school because there are no jobs (except those $10-an-hour internships).Almost everyone acknowledges that this is not a cyclical recession, but a “financial reset” resulting from the financial meltdown. At the spring Counselors of Real Estate meeting in Chicago a few weeks ago, the optimists were saying another three years before we start trending up. But the pessimists were saying six, seven or eight years!Ours is a “niche” or “boutique” shop — we have about 20 clients that keep us plenty busy. Having said that, we are working harder and longer than we might like, but we are not about to turn these key clients down. We hear the same thing from attorneys, accountants and other professionals. It is a grind for them, but they are paying their bills.One of our lines of business is “rent a real estate department,” designed for small firms, institutions and not-for-profits that do not have ongoing real estate needs. When they need help, we come in to address their needs and then go off the clock. In certain instances, our clients grow into sizable entities that need to bring real estate, facilities or construction management in-house. We help them identify and hire good people.But there is a shortage of good people. This is true in banking too, especially commercial lending. Soon there will be a real crunch. I joined BankEast in the mid-1980s. My first project was to plan and oversee the build-out of “BankEast University,” an in-house training and professional development function. Technology was evolving monthly. Beyond computers, we were trained in sales, customer relations, credit skills. We had built-in training and intern-type jobs. Every spring, we would go up to hire one or two bright graduates from Dartmouth.A troubling patternSince the previous real estate bust of the early ’90s, when five of our local banks went down, banking has changed to a less desirable career and more of a job. There are dozens of commercial lenders who I know who change employers every two to three years. Many are just hoping to hang on and “get to retirement.”One of the discouraging elements of their job is that there is not a training program, at least not the kind they remember from when they entered the business. At first, we thought this too would pass, but probably not. If you need more lenders, you go out and recruit an existing lender from a competitor, ideally one who brings a “book of business” with them.This pattern manifests itself in many professional service industries, including law, accounting, even medicine. When more than 80 percent of doctors are employees of the hospitals, it changes the view of that career path. My father was an orthopedic surgeon who practiced for 43 years after medical school and residency. Very few of today’s doctors either want or are able to practice into their 70s.Half of my freshman class was pre-med. About one-third of the class went on into medicine or related sciences. Many look back and wish they had done something different.The field changed so fast, probably due to technology, but much more so due to financial pressures on the sector itself, from what they entered into (medical school, internship, residency and fellowships). Very few thought they would end up as employees. With so much specialized training (and investment), they were pretty much locked in. Many would find parallel paths of income by owning their office space. Years ago, it was older doctors looking to lease or sell to younger ones. Today, most often it is the middle-aged doctors joining the hospital or a larger clinician network.Many elements of today’s medicine are nearly identical to other businesses. It is one of the biggest drivers of why we struggle to provide affordable health care and why such a significant portion of the population goes without coverage.With the ongoing “Great Recession”, this too is going to bump up against concrete limits, similar to post-secondary education. We are going to have to rethink what a product or service needs to be, who and how it will be delivered and at what price points.Bill Norton, president of Norton Asset Management, Manchester, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at email@example.com.