From the November 2011 issue of Investment Advisor • Subscribe!

November 1, 2011

The Best and the Brightest

Today’s financial planning students are far better than we were at their age—and they should be treated accordingly

My duties as a part-time faculty member of Kansas State University’s CFP-registered financial planning program included taking a group of students to this year’s FPA “Experience” Conference in San Diego. Students love getting this real-world exposure to financial planners and the financial services industry, and I’m sure it’s an eye-opening experience for them.

This year, as it turns out, I probably learned as much or more than my students from spending time with them. It was eye opening for me to see not only how knowledgeable today’s students are, but how good their people skills are. The professional training of planning students was great when I was in school, but it has come a long way in 12 years. I suspect most advisory firms don’t know the quality of today’s students’ education, but it became clear to me that how well advisory firms adapt to the much higher quality of young planners today will determine their ability to grow and succeed in the future.

To start, the first thing I noticed about these students is how good their people skills are. I could see it clearly in the way they acted with each other and especially in their interactions with advisors. They were particularly attentive, connected with people, got them to open up and asked them probing questions.

So, I asked a few probing questions of my own and found out that K-State and other schools now have intensive programs designed to make students better at interacting with clients. Students are taught counseling techniques that are used in other people professions. Then, at K-State at least, they are given face-to-face, real-world experience working with clients in a program that provides financial counseling to other students. The planning students are observed with clients by faculty members and other students through two-way mirrors. Then their performances are graded and critiqued. How many of today’s older advisors have ever had their client meetings observed and critiqued?

That kind of feedback can really elevate one’s game, judging by the students I observed. These “kids” can talk, and about some serious stuff. They even made me question my communication skills. Owner/advisors used to say it’s great that financial planning graduates have technical knowledge, but it takes years before they will be able to communicate effectively with clients. Today’s young advisors will benefit from experience, but they are much farther up the learning curve than my peers and I were a decade ago—a fact that today’s firm owners can’t ignore if they are going to successfully recruit and work with the students coming out of top-notch planning programs today.

My K-State students were clearly using their client training communication skills when they talked with the successful advisors they met at the FPA conference. Whether it was conscious or merely the result of their training, they made the older advisors feel comfortable and got them to open up and talk about themselves and their firms. In the majority of cases, the students were subtly interviewing advisors, trying to find out everything they could about that advisor (similar to how you would a client) and making judgments about whether these advisors would be good candidates to work with (similar to how you judge whether a prospect would be a good client).

Which leads me to the second important thing I learned about today’s financial planning students: They have a very different employment mentality than my graduating class did when we were looking for our first planning jobs. Before the dot-com crash, financial planning practices were booming and the demand to hire young advisors was very high. (What I’m going to say next may sound counterintuitive, but just bear with me.) Consequently, we weren’t very picky about our first job, because we knew we needed to gain practical experience to be marketable; we all planned to look for our ideal jobs after we had a few working years under our belts.

Fast-forward to today’s tough economy and job market for young planners, where good jobs are far less plentiful. You might think this would make today’s planning students inclined to take the first job they can find, but the reality is just the opposite. My conversations with today’s young planners revealed that unlike my generation, they are very focused on finding the “right” job for their first job after graduation. Why? Because today’s job market is much worse than it was in our day; they don’t know if they’ll be able to find another one down the road, so they want to make their first job the right job for them.

This role reversal will have major consequences for advisory firms looking to grow within the foreseeable future, particularly when it’s combined with my first observation. For one thing, instead of gaining experience to make themselves more attractive to employers, today’s students are frequently turning to more education to get a better job: Masters and doctorate programs are available now in personal financial planning and all are experiencing some of their highest enrollment levels.

These better-trained, better-educated students are looking to join a firm that they expect to be with for a long time, and they are fully prepared to wait until they find the right firm for them. To attract them—and keep them as employees and, eventually, partners—firm owners will not only have to articulate what their firm has to offer far better than they have in the past, but they also have to create a job, an environment and a firm that can support, utilize and motivate this generation of professional advisors. Here are some suggestions for what today’s advisory firms will need to do to attract the best of today’s financial planning students:

Be honest. In looking back over the thousands of job recruitment interviews I’ve done, I realize that within the past two years, the job candidates started interviewing me. In this environment, advisors will have to sell their firm, instead of students having to sell themselves. These students know more about the independent advisory industry and how the financial services industry works than any candidates you’ve interviewed in the past. What’s more, thanks to social networking, they are more connected to each other, sharing information about the advisory firms they come across (see “The Flip Side of the Social Network: Advisors’ Missteps Will Haunt Them” on AdvisorOne.com). So be forthcoming: Otherwise, you’ll look bad to a whole generation of advisors.

Understand their better level of education. These students are very serious about their profession and their careers. If you don’t take them seriously, you won’t be the firm for them.

Have a clearly defined professional training program and career path. Because these students expect to have only one job, they expect to see how their job will take them to where they want to go, which usually includes maximum professional development and partnership potential in the firm. They know that they don’t know everything, and they expect you to fill that void. You need to be able to tell them how you’re going to do that. They also want to know that if they commit to your firm, you will be committed to them over the long term.

Support their ability to quickly contribute to the success of the firm. These young advisors aren’t going to be content to tread water for a couple of years while you get your act together. Your firm will need to be prepared to support these advisors to hit the ground running. If you fail to enable them to make a contribution, your firm will suffer and you’ll eventually lose them.

Invest in them. These students are better than their predecessors and they know it. So, throw the salary tables out the window and create meaningful compensation packages based on their quick and valuable contributions to the firm. In my experience, the most economically feasible and most motivational way to do this is to tie a portion of their compensation to the success of the firm in the form of a revenue-based bonus. That way, when you win, they win, too.

Get them in front of clients as quickly as possible. You’ll be as amazed as I am at their poise, their confidence and their ability to make people feel comfortable. Will they be better with your clients than you are? Maybe not, at least at first—but holding them back would be a grave mistake and a waste of their honed communication skills.

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