The financial advisory business faces a classic good news/bad news situation ‐ one that presents both opportunities and challenges. On the good news side, the number of investors using a financial advisor is expected to increase 27 percent by 2022. Counter‐balancing that outlook is a looming shortage of experienced financial advisory professionals. Market research firm Cerulli projects that approximately 25 percent of advisors plan to retire or leave the industry within the next 10 years, and for every eight advisors who retire, only three are trained to replace them.
The industry appears to have been slow in developing strategies to address this challenge. For example, recruitment efforts targeting Millennials (born between 1980 and 1992) are bumping up against significant roadblocks. Two challenges are a widespread lack of awareness of the financial advisor profession and a misunderstanding about how it might align with this group’s core values (work‐life balance, opportunity for growth, and an interest in helping other people).
Finding ways to meet those challenges may be critical to the future success of financial advisory practices. Firms that have successfully recruited Millennials value their tech expertise, work ethic and ability to adapt to changing situations. A panel representing several points of view—broker‐dealer, recruiter, educator, and Millennial advisor—gathered to discuss this topic at the annual Fidelity Investments Recruiter Summit held in Boston in October, 2014.
The Summit Participants include:
- Kevin Beard, Advisor Group Executive Vice President, Recruiting & Acquisition Strategy
- Grace Kiem, Fidelity Investments College Relations, Program Director
- Luke Dean, Utah Valley University’s Woodbury School of Business Program Director, Financial Planning Program
- Joe Domek, Associated Bank Senior Vice President/Director of Sales, Associated Investment Services
- Justin Hayward, Commonwealth Financial Group Partner
- Tammy Robbins, Lincoln Financial Network Senior Business Development Director
Making awareness and education a priority
Finding ways to educate Millennials about the financial advisor profession is high on the list for many firms. Educational efforts may need to include raising Millennials’ awareness that the profession can align with their core values, especially their commitment to making a difference in people’s lives.
Fidelity’s 2014 Recruiting Redefined Study uncovered a low level of familiarity with the financial advisory profession and some false impressions that exist among Millennials. For example, most Millennials surveyed believe a financial advisor spends a significant amount of time in a sales capacity and are unaware that advisors typically spend their time on financial and investment planning activities. They often don’t recognize that the profession involves working closely with clients to help them navigate some of life’s biggest challenges and improve their quality of life in significant ways—exactly the kinds of things many Millennials say are important to them in a career.
Justin Hayward, a Millennial advisor who is a partner at Commonwealth Financial Group, agreed there is a lot of confusion among his generation about what a financial advisor actually does. He questioned how the industry has traditionally reached out to Millennials, with a focus on brand names and market strength. “I don’t think Millennials care what your group is—your brand name, the size of the organization—I think they care about how you can help them be what they want to be.”
Expanding outreach efforts with internships and mentoring
Kevin Beard, executive vice president, recruiting and acquisition strategy at Advisor Group, an independent broker‐dealer, reported that his company is stepping up efforts to recruit young advisors in 2015—a move it considers critical in light of an average age of 56 among its advisors.
A key component of Advisor Group’s strategy is a “para‐planning mentorship program,” which involves a junior advisor working with a senior counterpart over a five‐year period. “You’re not labeled as an advisor in your first five years. The focus is on truly developing yourself during that period by working with clients, refining your relationship ability and finding out your strengths,” he explained. He noted that Advisor Group is working with an outside firm for help with some of the training and education.
Beard also spoke about the importance of casting a wider net for applicants rather than focusing solely on accounting or finance majors. “One of our reps brought in a journalism major, who has been with him for four years now,” he said. “He’s turned out to be quite the producer.”
Some firms are leveraging internships and campus ambassadors as part of their outreach programs. Fidelity Investments has an extensive internship program, and it has helped the company’s managers recognize the value Millennials bring to the organization, said Grace Kiem, college relations program director at Fidelity. In her own experience, she has seen that “their productivity, the amount and quality of the work they’re getting done” underlines this group’s career growth and potential. Fidelity also focuses on building long‐term relationships with faculty and career service officesat colleges and universities, rather than just appearing at career days and jobs fairs. It has established a campus ambassador program that involves former Fidelity interns going into schools to explain their experiences to other students, which has proven an effective Millennial recruitingstrategy.
Actions to Consider
The looming retirement of large numbers of senior financial advisors and too few younger candidates interested in replacing them means that advisory firms may need to step up their recruiting efforts in new ways:
- Financial planning programs at institutions of higher education may produce strong candidates to help meet some of the demand. Firms that deepen their involvement with those schools and establish early relationships with students, especially through internship programs, may yield the best prospects.
- Firms may want to consider expanding their recruitment horizons beyond accounting and finance majors in their search for candidates to include those with characteristics that may make for good advisor, such as strong relationship skills.
- Pairing senior advisors with junior advisors and sales assistants in mentorship programs can be an effective onboarding and retention tactic.
- A partnership model with an equity stake after a defined period may provide an important incentive to younger advisors as well as a succession‐planning solution for senior advisors.
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-- See also:
- Recruiting Redefined: Perspectives on the Looming Advisor Talent Shortage
- Take the Quiz: Perspectives on the Looming Advisor Talent Shortage
- 2013 Fidelity® Millionaire Outlook Executive Summary: Gen X/Y Millionaires Not Sitting Idle
 U.S. Bureau of Labor Statistics, Employment Projections program as of December, 2012.
 Cerulli Quantitative Update, Advisor Metrics 2014, Capitalizing on Transitions and Consolidation, Cerulli Associates.
 Cerulli Quantitative Update, Advisor Metrics 2013, Understanding and Addressing a More Sophisticated Population, Cerulli Associates.
 Fidelity® Recruiting Redefined Study, September 2014 (full survey criteria on the last page).
For investment professional use only. Not for distribution to the public as sales material in any form.
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The 2014 Fidelity® Recruiting Redefined study conducted by Fidelity Institutional is based on multiple research methodologies including four in-person focus groups with 44 participants in total and four online quantitative surveys with 600 participants in total. Research participants included hiring decision makers at financial advisory firms, students (college and MBA), young financial professionals, new advisors, college counselors, and career counselors interviewed from April through June of 2014. All the research was “blind”— Fidelity was not identified as the sponsor during any phase. The study was administered by Greenwich Associates, an independent firm not affiliated with Fidelity Investments.
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