Propelled by a sense of urgency, wealth management firms are rethinking the way they train and develop young advisors—a move they hope will crimp the coming talent crisis.
“Firms are really paying attention to this. It's a big deal,” observes Steve Johnson, who heads The Next Level Sales Consulting in El Segundo, Calif. “If you don't backfill what you have, you’re going to lose a lot of clients. You’re going to lose period.”
More than one-third of U.S. financial advisors plan to retire over the next decade, according to a report from Cerulli Associates in February. In order to keep up with demand, the industry will need to add over 200,000 new professionals.
That's hugely troubling math for an industry that knows it needs to do a much better job of developing competent, caring—and yes, happy—young advisors.
As Racquel Oden, head of new advisor development for Merrill Lynch Wealth Management, puts it: "It's a game changer. It has to be."
Much of the work that's being done today involves retooling the training approach to accommodate the millennial generation, which has a vastly different learning style than previous generations. Born in the 1980s and 1990s, millennials are social and collaborative learners who like the classroom, peer-to-peer feedback, working in groups and information on demand, according to experts. They want resources to aid their development, and they need to understand the “why” of things, not just the “how.”
“This is where a lot of managers have challenges working with millennials because their orientation is all around ‘Get it done,’ ‘Make it happen,’ ‘Figure it out.’ Millennials need a good branch manager or coach who says: ‘OK, here are the 10 things you need to do every week and we’ll talk next week about what's working and what's not working.’ Millennials love that,” says Johnson, whose clients include Merrill Lynch, RBC Wealth Management and Wells Fargo Advisors.
“They have been helicoptered by their parents their whole life. They love feedback. They love one-on-one coaching,” he adds. “They like that attention. They’re used to it.”
Kim Dellarocca, global head of segment marketing and practice management at Pershing, said it's also important to teach young advisors to interact appropriately with other generations.
“They have a propensity for texting and shorter, pithier responses to things. The way they communicate can be one-sided,” she says. “They can't just speak the language of one.”
As firms begin to focus increasingly on growing organically, Dellarocca says the millennial challenge will become even more critical.
“We’ve got a generation that's creating a new standard in many ways. When you hire from an existing firm, like a wirehouse, on the plus side you have the advisors’ experience, their clients, their assets,” she adds. “The trouble is getting someone to fit into your culture. How do you undo their bad habits? By investing in millennials rather than recruiting from the same diminishing pool of advisors—who, by the way, are expensive and have a shorter time frame to add value—you’re developing a farm team and a bench. You get to raise these folks and that's a culture fit at the highest level.”
When longtime Raymond James senior executive David Patchen was tasked with overseeing new advisor education last September, he took a hard look at the two-year training program he had helped launch just three years ago.
“The way I describe it is that it's a mile wide and an inch deep. We want to go narrow and deeper. There's a lot of great information in it. But you can't tell millennials what to do. It's not effective. What you have to build in your program is a pretty broad and diverse menu that works for their style.”
So Patchen set about to fix things.
He put together an advisory board consisting of a successful young advisor and the eight branch managers who have done the best job at developing new talent. They met in January and February, and last month they settled on some programming tweaks.
Among them, young advisors will now begin asset gathering sooner than later. “There's going to be a lot less lecture and a lot more doing; that's the way people learn,” says Patchen. Video will also be introduced as a training tool.
The firm is also looking to head off a major problem: the variability of branch environments and mentors. “This is one of the biggest challenges all of us face—and it's so critical to the success of the candidate,” notes Patchen. “Some branches have a more active culture around developing new advisors and some don't. What's the industry to do about that?”
As a start, Raymond James is looking to replicate throughout its network what appears to be working well in forward-thinking branches—such as Monday morning meetings or Tuesday work nights where junior and senior advisors pair up and walk through projects together.
Young advisors who have a mentor but aren't a member of a team will now get additional support from the firm's trainers with one-on-one phone calls twice a month. “There is mentor variability, let's be honest,” Patchen adds. “We also need to help mentors be more effective. We need to evolve our mentor training. It's good, it's not great.” Additionally, the firm is going to work harder at “sourcing” the right candidates in the first place.
Raymond James will also introduce to trainees what Patchen calls the next iteration of prospecting: the “puppy dog approach.”
“In the old days, a pet store owner would tell a family: ‘Take the puppy home and if you don't like it, bring it back’,” he says “No one ever brings the dog back. So the question becomes: How can you give your prospect the experience of being a client before they become a client?”
With planning software today, he says, a trainee can do just that by populating a program with just a little bit of information from the prospect. What happens next? “The prospect says ‘Wow, this is neat but what if I give you all my information?’ If I give you everything, you can make it fully accurate. They’re hooked,” adds Patchen. “I really think this is going to be a major catalyst for success for young advisors. Our industry doesn't have a puppy dog approach, never has. This gets us one.”
Merrill Lynch, too, is building out its recently revamped training program by “widening the view” beyond the local experience, according to Oden. Practice management videos of the very best advisors and trainees are in the works. Trainees will also be placed in Bank of America bank branches where they will help their Merrill team identify clients with investment needs.
In the last year, the curriculum has been tweaked to highlight client-advisor conversations that are more goal-focused and planning-based. “In the past, everything was investment-focused. It was all about alpha, beta and outperforming the benchmark,” Oden says. “Language needs to go the core of the heart: How are you doing towards retirement? How do you plan to fund your child's education? What's essential and what's aspirational?” And, beginning this year, in recognition of the importance of teams, every trainee will have the opportunity to join one.
In a first for Commonwealth Financial Network, the firm last year launched its Junior/Senior Intensive Mentoring program—pairing 10 senior advisors with 11 juniors. It worked nicely, according to practice management director Joni Youngwirth, because the juniors essentially ended up with 11 mentors, not just their own. Or, as she puts it: “It takes a village to raise a new advisor.”
Youngwirth says one of the biggest takeaways was the need to create a common language fully understood by both generations.
“These are all seven-figure producers who have been successful for a long time. They are unconsciously competent. They need to create a dialect for something Senior knows how to do and has done well for decades but doesn't remember why they are so good at it,” she notes. “So when Junior says: ‘How did you do that?’ Senior has to put himself in slow motion and say ‘How do I do that?’”
During the course of the program, Youngwirth also discovered best practices—among them: set smart, clear and measurable goals for the junior advisor and align expectations between the new and seasoned advisor. “If there is a lack of alignment, it only gets worse with time,” she says.
Here's a look at other trends that are gaining traction in the advisor training space:
Fast tracking: Firms are putting young advisors in front of clients much sooner than they did in the past. Formerly, a new hire would sit in a client services position and do back-end work for a year or longer. Now, they’re attending client meetings within three months.
“It's a huge change,” says consultant Angie Herbers, who heads Angie Herbers Inc. in Manhattan, Kan. “The ultimate objective is to get younger advisors in front of clients and advising. We have to train them a whole lot faster because of the difficulty with hiring lead advisors. It's one of the hardest things for my firms to get their arms around. But the best way to train them is to show them. Put them in meetings all day or every day. The older generation has to realize that the career track for younger advisors is completely different than how they learned.”
A push for women: Seventeen percent of the 2,400 advisors attached to ING Financial Partners are women, roughly the industry average. Tom Halloran, president of the independent broker-dealer, is trying hard to change that.
Its Women's Advisory Network dates back to 2005 but in the last year it has become more robust with quarterly webinars and the launch this month of Chatter, an instant messaging feature that allows the firm's female advisors to engage in a virtual, private community for peer-to-peer learning and sharing.
“What we’re also trying to do is enable our female advisors to go out with our value proposition and talk to other female advisors about joining our firm,” says Halloran. “We’re working very hard to be the number one place for female advisors. I have three daughters; it's close to home.”
Women at the firm increased their business production by 26% from 2012 to 2013. And, last year, for the first time in ING Financial Partners history, a woman ranked as top producer. Not only that, she posted the highest annual production at the firm ever.
Military outreach: It's not unusual to recruit new advisors with military backgrounds but Edward Jones has taken the practice to another level. Since May 2012, the broker-dealer hired 833 advisors with military experience and 357 of them opted to join its FORCES program, which adds 10 extra weeks of training in a branch typically run by a military vet.
During the transition, the senior advisor helps the vet and his or her spouse acclimate to a corporate setting and day-to-day operations. “Our comment always to the military vet is: ‘Do you want to go home?’ Home might be New York City but it might be Liberal, Kan., or Omaha, Neb. We can make that happen,” says John Rahal, general partner with overall responsibility for recruiting financial advisors.
The military provides a rich pool of diverse candidates and Rahal says the outreach has resulted in greater diversity, a plus for the firm. The military recruits are also experiencing higher rates of success than other trainees.
“This is critically important because there are so many clients that are not white males who make the financial decisions in their household,” he added. “We as an organization strive to look like America. America is not all white Anglo-Saxon males.”
All in: Millennial advisors need to have a “heart connection” to their work in order to succeed fully, according to career coach Janine Moon, president of Workforce Change in Columbus, Ohio.
“Whatever your work, it's more productive and satisfying when we give it our all—when we are all in,” says Moon. “There's a difference between having a heart connection with work and a cognitive connection. With a heart connection comes high quality, innovation, creativity and a deep, deep satisfaction that continues to fuel whatever the individual motivators are that charge someone up.”
When you are all in, she says, everyone wins.
“When I recognize that what I do matters, the more motivated and better quality of work I’m able to produce. And, from the employer perspective, the employee is instantly aligned with firm strategy,” she says. I don't think millennials want anything at work more than the rest of us do but they are young enough and savvy enough that they are willing to speak it.”
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