The 2014 IA 25 on the Next Generation of Advisors and Clients

Advisors and their clients are aging together. A Cerulli report released in January found the average age of a financial advisors is almost 51, and 43% are over 55. By 2030, all the baby boomers will be 65 or older and about 18% of the population will be in retirement—or at least at retirement age—according to Pew Research Center population projections.

What does that mean for the industry? Many of this year’s IA 25 honorees recognized that a new generation of clients needs a new generation of advisors to serve it. In an industry rife with competition, there was a general consensus—not to mention optimism—about the future of the profession.

Bernie Clark, Executive Vice President, Schwab Advisor ServicesBernie Clark
Executive Vice President, Schwab Advisor Services

In his interview with Editor-in-Chief Jamie Green, Clark showed “palpable excitement” about the next generation of advisors. Furthermore, he pointed out that those darn kids aren’t very different from the older generation of advisors.

“The generation that’s coming behind: They look familiar, they talk about having balance in their lives, they want relationships, almost 70% want to be in relationship management,” Clark said. And while they may be more likely than older advisors to build relationships online as well as in person, the next generation is interested in “making long life choices and will be socially responsible,” Clark said, “but so was ours.”

(Photo: Tom McKenzie)

Caleb Brown, Partner, New Planner RecruitingCaleb Brown
Partner, New Planner Recruiting

Brown told Executive Managing Editor Danielle Andrus that some firms are “taking the same approach to developing their new talent to develop their next generation of clients. Someone who doesn’t have $2 million to manage but who is 30 years old and is going to earn a lot of income, let’s turn them into a good client.”

Similarly, firms are looking for candidates while they’re still students by creating internship or “residency” programs. “It’s like a baseball team,” he said. “Let’s see what our farm team looks like and see if we want to make a hire.”

(Photo: Stan Kaady)

Harold Evensky, President, and Deena Katz, Chariman, Evensky&Katz Wealth ManagementHarold Evensky and Deena Katz
President, Evensky & Katz Wealth Management; Chairman, Evensky & Katz Wealth Management

As professors in Texas Tech’s personal financial planning program, Evensky and Katz are committed to the next generation of advisors.

“We have to get our heads out of the sand” about solving real-world problems, Katz said at a CFA conference in Seattle. In an interview with the couple in early May, Evensky agreed that issues like finding new talent and helping veteran advisors attract ones to the profession “are important; they’re all critical.” He said he and Katz “share the passion” about finding answers to these next gen questions. Katz quoted Robert Schiller, the University of Chicago academic, in saying, “We have to solve real world problems, not just do what we’ve been doing.”

Mark Tibergien, Pershing Advisor SolutionsMark Tibergien
Chief Executive Officer, Pershing Advisor Solutions

Tibergien has noticed a lot of advisors don’t want to share firm ownership with younger advisors. “How many times have you heard advisors say, ‘There’s no way I can let an employee become an owner until they’ve suffered as much as I have.’?” he asked Jamie Green in an April interview, adding that such bias is bewildering. After all, most older advisors “were at one point younger advisors—they weren’t born with grey hair and hemorrhoids” yet somehow “they were able to build businesses.”

Tibergien also recognized the value in a master/apprentice relationship. “Every other profession uses a master/intern concept, but for some reason financial services prefers to eat its young.” The industry needs to make a place for younger advisors because “it’s not just advisors who are aging and disappearing, it’s the client base,” he said. The profession must “recognize that Gen X and millennials are accumulating money—just like the boomers did.”

(Photo: David Johnson)

Michael Kitces, Director of Research, Pinnacle Advisory GroupMichael Kitces
Director of Research, Pinnacle Advisory Group

After founding FPA’s NextGen, Kitces will officially be “kicked out” this year when he turns 37, but his dedication to the next generation of advisors and continues in his other pursuits. In early April, he launched the XY Planning Network, a platform dedicated to helping young planners build a fee-only business targeting Gen X and Gen Y clients. He’s also a partner of New Planner Recruiting with fellow 2014 honoree Caleb Brown.

Most in the Gen X and Gen Y generation “certainly aren’t going to meet someone’s asset management minimums; they live on cash flow and live from month to month, so we’re trying to meet people where they are,” Kitces said in his interview with Washington Bureau Chief Melanie Waddell.

He added that he’s “always found that most financial advisors work with clients within 10 years of their own age,” who are within their “interest group.”

Tom Nally, President, TD Ameritrade InstitutionalTom Nally
President, TD Ameritrade Institutional

The industry has “more work to do” when it comes to the generational wealth transfer. The next generation “is a powerful force,” he said, that has “different values, different preferences than the boomers.” To serve those clients, the industry needs to do a better job of attracting the next generation of advisors because “clients want somebody who looks like them from a gender and ethnicity” viewpoint.

He pointed out that only 6% of advisors are under 30. That “sobering” statistic led TD Ameritrade to launch scholarship and financial planning program grant programs, as well as an internship initiative.

Amy Webber, President, CambridgeAmy Webber
President, Cambridge

Although Cambridge’s Synergy Exchange program started as a way to recruit female advisors to a notoriously male-dominated industry, the firm recently expanded it into a next-gen initiative. “We realized we could replicate the need for mentoring to the next generation as a whole,” Webber told Danielle Andrus. Cambridge also has a new reverse mentoring program that arose out of advisors’ concern over the impending wealth transfer and fear that they might struggle to connect with younger or female clients as well as with their older, male clients.

Although those particular initiatives are fairly new, others aren’t. “We’ve done a really good job over the last five years of getting the 60-something advisor to recognize that they need a 40-something advisor,” Webber said. “Now we need to get those 60- and 40-somethings to realize that they can get value out of the 20-something.”

(Check out Investment Advisor's full IA 25 for 2014 list on ThinkAdvisor.)

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