Few of us question the concept of teaching hospitals. We accept that health care is necessary, and that the incoming generation of physicians needs time and experience to find their place. So why do we hold back the next generation of advisors by not requiring a proper and fully immersive introduction to their new field?
Closing the Mind-Set Gap
Hiring next-gen advisors is becoming increasingly important as firms mature, but few have established or filled necessary roles for their growth and longevity. This delay may be due to a philosophical chasm between parties: the founding advisor mind-set versus the inexperienced next-generation advisor mind-set.
As industry expert Stephanie Bogan, CEO of Educe, noted in a recent InvestmentNews article, “The founder generation of advisors who now run successful firms are self-driven and self-made . . . The advisors following in their footsteps have grown up in a different environment and time. These individuals have professional degrees and designations, and expect to join a service firm, not a sales force.” Therein lies the rub. Do you, the founding advisor, have the skills, the time, and the passion necessary for hiring next-gen advisors? Can you guide them as they take on operational, planning, advisor, and, perhaps, future leadership roles in your firm?
In the recent book G2: Building the Next Generation, Philip Palaveev equates the development of the next generation of advisors with succession planning. While this is true, firms also need this next generation for continued growth. The typical advisory firm doubled in size every four to five years between 2003 and 2014, according to the InvestmentNews 2016 Financial Performance Study of Advisory Firms. While growth has slowed, Palaveev notes, “firms continue to need more people, more professional capacity, and most of all, more leaders.”
Regardless of whether you want to find a successor or grow your firm, you need to look to the younger generation for talent. Here, I will discuss where to find them and how to develop a game plan for bringing them into your firm.
Discovering Your Next-Gen Talent
While there are many ways to go about this process, you could follow one of the general schools of thought:
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Look for experienced, less established advisors who have a book of business.
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Seek the next generation of talent being produced by top undergraduate/graduate financial planning schools.
Commonwealth’s Practice Management department has been having serious conversations with top financial planning programs across the country. We have seen intense interest from these programs to help connect their students (your future talent) with our advisors. Internships are a logical first step in the process of bringing this pool of talent to firms.
“If we want a profession, we need to hire from a professional track,” says Nathan Harness, PhD, CFP®, and TD Ameritrade Director of Financial Planning at Texas A&M University. “Internships afford firms the opportunity to bring in top talent. Choosing from the 100-plus financial planning programs in the U.S. allows a firm to hire someone who has made a commitment to the financial services industry.”
Not all graduates coming out of financial planning programs are interested in becoming advisors, however. Courtney Grusendorf, who completed her bachelor’s degree in personal financial planning at Texas Tech University in 2018, stated during a panel discussion at Commonwealth’s recent National Conference in Austin that after her internship at a Registered Investment Adviser, she discovered a passion for the operations side of the business. From that experience, she was better prepared to find a role in an advisory firm that fit her and the firm’s needs.
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Surprisingly, few entry points to a meaningful internship exist. Many students end up interning with insurance companies or traditional wirehouses and become disenchanted with the industry. Instead, they should be exposed to the financial planning process and client meetings, and they should have a chance to weigh in on important decisions on subjects they have studied (e.g., evaluating software packages). This would give the intern valuable experience and give you an opportunity to meaningfully decide whether to continue the conversation with the student after the internship ends.
Follow the Well-Paved Road
According to Ruth Lytton, PhD, director of the Virginia Tech CFP Board-Registered Financial Planning Program, an internship program needs structure and purpose, which you can achieve by:
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Developing a job description
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Designating a staff member to serve as a mentor
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Paying a reasonable salary
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Continually challenging the interns as their skills advance
Before bringing on interns, develop a plan to get them involved and give them tasks from day one. This should include meaningful projects, client file review, and participation in client meetings. “Firms often comment that they are surprised by the quality of work and the efficiency with which many interns work,” Lytton states.
Once the internship ends and there is mutual interest in continuing the working relationship, you’ll need to outline a pathway for growth. All too often, interns who are later brought on as full-time employees leave because of an unclear career trajectory and limited interactions with clients, according to Lytton.
Texas A&M’s Harness says, “Tell the next-generation advisor what it took for you to get where you are. Why do you do what you do? Share your passion for the business.” A logical career runway presents the intern with the opportunities that lie ahead while giving you the chance to retain and grow the next generation for your firm.
This theme was heard consistently on another panel at our National Conference involving founding partner David Griswold with his partner Ashley Ott and founding partner Robert Blakely with his associate Emily Promise. In six years, Ott rose from intern to partner at Vantage Point Financial, and the key to her success, she says, was consistent communication around an agreed-upon path. Likewise, Promise mentioned that in evaluating a competing offer from a prestigious Wall Street firm, she compared it to Blakely’s business plan and path that he had constructed with her. Now, while still attending High Point University, she’s an advisor with Blakely’s firm.
While Promise’s trajectory at Blakely Financial is not typical, it is instructive. In the beginning, Promise worked on scanning and paperwork duties and eventually moved from administrative work to assisting with investment and financial planning analysis. That soon progressed to sitting in on meetings, and while Blakely admits a lot of learning happened on the fly, clients now turn to Promise for added insight. She is developing a documented intern program and is now managing a new intern who is updating the firm’s website and social media efforts.
Promise states, “I’m seeing everything from the ground up. I could see the impact I would have in clients’ lives with this career.” The learning was mutual. While teaching Promise, Blakely realized he had strayed from some habits that had made him successful and has since re-engaged with those positive habits and processes. Mentoring and coaching can be a two-way street!
The Right Direction
Setting a clear path forward for the next generation is an ongoing effort. It’s not just about bringing in someone to eventually replace you. It’s about closing that mind-set gap between the generations and thinking about how a set of fresh viewpoints and knowledge can aid the practice and its growth.
