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Five Strategies for Next-Gen Financial Advisor Recruiting

This is the second in a series on the state of advisor staffing and how sales and distribution leaders can get ahead – and stay ahead – of the looming advisor shortage by focusing on effective recruiting strategies. Read part 1 here.

In the best of circumstances, recruiting the best and brightest is a challenge. Add to that an apparent financial advisor talent shortage and the situation can become dire.
The biggest area of concern in the industry right now is getting young talent to join the profession. Cerulli Associates, a leading financial services industry research firm, found that only 27% of advisors today are under 40, with only 5% of those under the age of 30. With their projection that more than 1/3 of advisors will retire in the next 10 years, the future of financial advice starts to look a little precarious.

But the industry as a whole is working to increase the popularity of the profession and there are plenty of steps you can take yourself to secure the right talent (and let’s not forget that the picture may not be as grim as it seems).

Five Strategies for Recruiting Advisors

  1. Leadership must focus on recruiting, retaining and growing advisors. Every aspect of your firm and its unique value proposition needs to be viewed through the lens of the new recruit. Think about how your firm’s commitment to making its advisors successful is different and clearly articulate it during the recruiting process. Providing access to basic technology, marketing and sales support is table stakes. So what should firms highlight instead? Start with the digital experience for both client and advisor. Add to that some ways in which the firm helps advisors build their practice for years to come (e.g., availability of transition and onboarding teams, access to continued education and training, mentorship opportunities, career advancement and options to scale and grow their business). As you make decisions consider: Will this encourage an advisor to join your firm or discourage them? Is this something that will help advisors grow and want to stay with the firm? Your advisors are your best asset; don’t make a decision without considering how it impacts them, even before they join your firm.
  2. Demonstrate the need (and hire) for financial planning and advice across generations. Clearly articulate and define the various opportunities within your firm and the ways advisors at different life stages may be able to help clients. For example, advisors who are starting this profession later in life, or decide they don’t want to retire, may be well suited to advise on retirement income planning and capital distributions. Take a closer look at candidates from CFP Board Board-Registered Programs at select colleges and universities.  Although these individuals may lack the sales experience, they are solid on the fundamentals of financial planning. By pairing a younger and inexperienced advisor with a more senior advisor, firms are in a better position to build a sustainable, multi-generational practice.
  3. Educate Millennial advisors on the value and service they can provide as a financial advisor. Millennials are socially aware, connected and service-oriented. They want a job that gives them personal satisfaction as much as they want a paycheck. Too often job descriptions are vague and at times in the past have been somewhat misleading. This has contributed to the negative stigma around the financial advisor as a “cut-throat salesperson.” When writing your job description, emphasize what a financial advisor at your firm can do for others and society as a whole. If you have a corporate giving or volunteering program, even better. Help them help the world.
  4. Invest in the digital tech stack. Millennial advisors expect the firms courting them to have the most up-to-date technology and strong tech support. No matter the generation, advisors are at heart, “people people”. Greater efficiency means they’ll be able to spend more time with their clients. (We’ll talk more about this in a future post.)
  5. Provide opportunities for training and define a clear growth path. Now is the time to lean in on the industry’s commitment to transparency and double down on strategies and programs to drive organic growth. Traditionally wirehouses served as the breeding grounds for advisor training programs; however, most of these programs were casualties of the financial crisis. We are starting to see a resurgence of Practice Management and Development Programs. For example: Wells Fargo now offers the ability for advisors to apprentice with a senior advisor as part of a two-year program; similarly, Morgan Stanley’s Advisor Associate Program provides a salary to help new recruits get acclimated to the business. Another emerging trend has been the staffing of advisor call centers to supplement a firm’s robo-advisor offering. Bank of America’s Merrill Edge provides investors with a “mashup of robo advisory and human help.” These firms are providing compelling opportunities to compete against RIAs and their rival independent broker-dealers.

Stay tuned for our next post, where we will discuss advisor on-boarding and retention.

Advisor Shortage? It’s All About How You Look at It

Looking at stats from a different perspective paints a more positive picture of the presumed “advisor shortfall.” This four-part series will explore the state of advisor staffing and discuss how sales and distribution leaders can skip the pain of the widely warned-of shortage to gain a competitive edge.

You see it everywhere you look: there is a looming (or current, depending on the source) shortage of financial advisors. It makes sense, right? Just check out this proof from EY’s report on The Next Generation of Financial Advisors, cited at every turn:

  • The average age of financial advisors today: 50 and rising
  • Two financial advisors qualify for social security benefits each year for every new advisor entering the field
  • The number of FAs under 40: 27% (only 5% of these are under 30)

It’s especially frightening for those charged with growing and leading their firms’ advisor base.

The Good News for Sales & Distribution Leaders (What the Numbers Say to Us)

Though it may look like there’s a strong case for a current or imminent advisor shortage – and indeed many firms may have trouble hiring good talent – there are plenty of positives both for the current and future state of financial advisor recruiting and retention.

The ‘Retirement Crisis,’ financial advice and the advantage of an older advisor workforce
Every day about 10,000 Baby Boomers turn 65, a milestone birthday that has been synonymous with retirement. As we live longer, the demand for financial advice has never been greater. However, despite positive changes in the industry like more flexible practice models, increased transparency due to regulations and new choices like self-directed platforms/robo advisors and fee-only advisors, many Americans nearing retirement are in a state of panic, overwhelmed with the prospect of having to work longer or potentially outlive their savings. These people need guidance, and it’s likely they want it from a peer rather than someone much younger than them.
The 50+-year-old population of financial advisors is a great fit for this client segment. People today are working longer than ever for more than just financial reasons. The advisors you thought would retire still have a very important place that they very well may want to occupy. They even offer a significant growth opportunity, as clients who have become friends enter retirement and continue to need advice.

Sentiment towards the profession
Sentiment can serve as a key indicator of how people feel about the profession and the likelihood of new entrants to the market. There are three important trends that offer optimism for financial advisory firms:

Positioned for Growth:  The Bureau of Labor and Statistics (BLS) forecasts a growth rate of 15% between 2016 and 2026. This growth rate is nearly double the average growth rate for all occupations.

High Pay: US World and News Report issued its 2019 salary rankings and Financial Advisors ranked #19 in best-paying jobs; excellent, particularly considering the top 20 were highly concentrated in the medical field which requires substantially more years of education and training.

Long-term Vitality: For a sometimes slow-moving industry, financial services is also stable and, as I discussed above, advisors can work well into the ‘standard’ retirement years. Clara Shih recently shared her thoughts around the need for financial advice from a human advisor and the resurgence of the financial advisor.

Human-Assisted Technology for the Win

The growing list of technology – automation, machine learning, AI, human-assisted robo tech – available today allows advisors and their teams to do more with less, achieving economies of scale that were previously unimaginable. Yet today, advisors still spend up to 70% of their time on tedious manual tasks. This points to the need for financial services firms to catch up to today’s technology and create efficiencies. Greater efficiency means greater productivity, an alternate solution to hiring more advisors. Once firms are caught up, they need to keep up. Technology today evolves at an extremely rapid pace and keeping up with the latest advisor technologies serves the purpose of maximizing manageable revenue per advisor while making your firm attractive to young recruits. More on this important topic in the rest of the series!

So, is the Advisor Shortage Real?

Maybe, but our advice is ‘don’t believe the hype.’ With the right strategy around recruiting, retention and technology, you don’t have to be impacted by the supposed shortage.

The role of the financial advisor is on the cusp of a renaissance, shifting into a world of modernity and this will take time. The advisor will emerge in the role of quarterback, assembling a team of resources and technology to ensure clients have a financial plan and meet their goals while delivering a superior client experience.
There is a widespread need for improvement in three key areas which I’ll discuss in my next posts. First, we’ll look at how companies can make their firms more attractive to a younger generation of advisors (you’ll need them eventually!). Next, it is imperative for sales and distribution leaders to spend time re-thinking and building a more proactive strategy to adapt to the needs of the emerging face of wealth in America. And finally, we’ll take a deep dive into specific technologies that maximize advisor efficiency and productivity while increasing your firm’s workplace appeal.