In response to my May 24 blog on the growing demand for young advisors (contrary to current conventional wisdom), “FavoriteSon” took exception, writing this comment: “Your assessment is upside down. What technology and new people lack is judgment and the seasoning of mistakes. Senior advisors, good ones, will always be valued over junior advisors.”
I don’t disagree: More experienced advisors will always be valued more highly than less experienced advisors. But in the economics of businesses, “value” is not the same thing as “need” or demand. For instance, in a manufacturing business, well-educated, experienced executives are typically “valued” more highly than production workers: that is, they get paid more. But the “demand” or “need” for workers is usually much higher, and consequently, there are a lot more workers than there are managers.
In small service businesses, such as independent advisory firms, this hasn’t historically been the case. In the old days, two or three advisors (or doctors, or lawyers) typically needed only an administrative assistant or maybe two to keep up with the paper work and answer the phones. Obviously, that’s not the case any more. Not only has the world become a lot more complex, but technology has greatly increased the ability of lesser trained, or lesser experienced, “workers” to leverage more experienced professionals so that they can serve more clients—generating more revenues at a lower cost.
I suppose it’s kind of ironic that it’s precisely because senior advisors are valued so highly (and paid accordingly), that firm economics are driving up the demand for lower-cost junior advisors to increase the seniors’ productivity. Today, advisory firms with senior advisors who are taking home $300,000, $500,000, or even $1 million a year can ill-afford to be spending their valuable time on tasks that can be done—and often done more efficiently—by clerical staff or junior advisors. When you start putting them on paper, there are as many as 15 different “jobs” that typical senior advisors spend their valuable time and energy on, but very few of those involve working directly with clients, servicing those clients or getting new clients.
In addition to working with digital technology, which is a rapidly growing job function at most firms, today’s young advisors can take many tasks off the desks of senior advisors. In most of the practices I work with, junior advisors handle firm operations, back office, employee management and even compliance, along with the more traditional jobs of portfolio research and management, financial planning and creating reports. My point is that as advisory firms get bigger, the demand for younger advisors is increasing—to increase the leverage of more “valuable” senior advisors, and enable them to focus on what’s most valuable to the firm’s clients.