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Financial Planning > College Planning

A Next-Gen Shot in the Arm

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If you want an idea of how to help and support the next generation of advisors, look no further than the medical profession. Sure, it’s more about modern portfolio theory than appendicitis, but few would ever argue that medical students should hit the phones and begin cold calling immediately upon graduating. While medical residents are learning to save lives and comfort the afflicted, how is ensuring a client’s financial solvency well into retirement any less important?

It’s a question Craig Pfeiffer has asked and answered. The CEO of Advisors Ahead, a firm dedicated to the successful development of financial advisors and that counts such industry notables as Texas Tech associate professor Deena Katz among the staff, looked specifically to the type of training young doctors receive right out of medical school when he founded the company—internships, residency programs and all.

Pfeiffer is a former wirehouse guy, but recognizes that the problem of career support (or lack thereof), which results in high washout rates, doesn’t discriminate by distribution channel. He spent 29 years with Morgan Stanley Smith Barney and “predecessor firms.” He left Morgan Stanley in October 2011, where he was vice chairman and a member of the executive committee, to devote himself to career development and support full-time.

“I started off as a retail stock broker and went through every evolution from 1980 until now,” Pfeiffer said. “Throughout that time I was an advisor, a branch manager, a regional director and had a hand in all those other various roles, in addition to playing the role of a corporate executive and, ultimately, vice chairman.”

Over that time, the human capital, training and professional development departments all reported to him, which resulted in what he calls “a late career mission;” one that is threefold. The first is advocacy; the second is training and support for the next generation; and the third is the practical application of that training.

“That’s the charge,” he added. “At its core, it is rooted in a pretty big gap around a need for more financial advisors and new financial advisors.”

The traditional entry point for financial advisors, he explained, has been people experiencing a career change starting at age 30 to 40. They’re typically looking for a high degree of autonomy, ideally building a book of business as a sole practitioner.

“It’s a sink-or-swim strategy, and most people have sunk, not swum,” he observed. “At the same time, there’s a university population that is not as attracted to the investment banking track or sales and training track. But now there’s an emergence around an interest in becoming a financial advisor, motivated mainly by the perpetuation of the CFP designation, as well as some others.”

A university population looking for jobs and an industry that needs the people—might there be a fit, he rhetorically asked?

“But they’re not set up to onboard them in the traditional model, so we need a new model.”

That model is the aforementioned medical profession, and it stacks up pretty well with what the financial advice industry is looking to achieve.

“You take medical students, and you don’t let them become doctors right away,” Pfeiffer said. “They spend time as a resident. Law students don’t become lawyers right away; they spend time as associates. Even teachers don’t become teachers right away; they spend time as student teachers. But there’s not been a natural bridge for advisors, so that’s what we’re trying to build. We’re creating the curriculum and infrastructure with firms to onboard college graduates as future financial advisors in a residency model.”

More specifically, it’s a combination of distance learning and practical in-field experience with three dimensions (see sidebar, “How It Works“). The first dimension is called “The Advisors Ahead Preparatory Program,” which is a distance-learning model for college sophomores, juniors and seniors who have declared an interest in becoming a financial planner or advisor.

“I would contend there is a mezzanine layer after that formal CFP education that would make them better ready to go to work if they were provided help with listening skills and communication skills, as well as an introduction to emotional intelligence and behavioral finance,” he argued. “It would provide a heightened sense of self-awareness.”

The second dimension is an “in-branch” summer internship program between the junior and senior years. The curriculum is 10 weeks long and involves actually working in an advisor’s office. The third piece, he concluded, is a residency period upon graduation, anywhere from six months to two years depending on the various firms.

“It would be the next dimension of a serious internship where you would start to take on specific roles and specific responsibilities and start to experience the accountability of the workplace,” he said. “Those are the three pieces: the student piece, the summer internship piece and residency program upon graduation.”

Surprisingly, Pfeiffer said Advisors Ahead does not have any formal strategic alliances with organizations like the Financial Planning Association or any of the universities, something he added is “appropriately so.”

“The university community is most interested in students being taught. They’re very guarded against commercial interests. The firms will welcome it because frankly the firms have not had a model, if you will, for this type of support.”

When asked about the types of firms he meant—wirehouses, large independent broker-dealers, RIAs, sole practitioners—Pfeiffer answered, “All of the above.”

The short answer is that the program meets the needs of the whole spectrum; it’s compatible and has gained the attention and interest of any firm with one or more financial advisors, whether it’s the one-man operation who has a succession issue and wants to materialize the values of practice or a firm with 15,000 advisors.

So, after all the hand-wringing and teeth-gnashing about the next generation of advisors and from where they will come, career tracks and early career development, has Pfeiffer really found the answer?

“I think it’s part of the answer,” he diplomatically dodged. “I would not suggest it’s the only answer, but it certainly is part of the answer. If you step back and think about the need for financial advisors, it’s a really good story. CNN and Money Magazine and various research organizations are all coming up with the best 10 jobs for the next 10 years. It’s a story of procedures; it’s the same story for doctors and nurses. Financial advisors now have joined the list on a consistent basis and are often in the upper half.”

The existing advisor population is aging and if the industry was a college basketball team, he explained metaphorically, it has plenty of juniors and seniors, but few freshman and sophomores, “because we haven’t recruited entry-level talent for the last five years.”

“By definition, you need talent to transition for that industry-wide succession. A second point in this intergenerational transfer story is the need to connect with the next generation. Guys like me connect with people our own age or older, but we don’t connect with their beneficiaries. If we want to maintain the continuity of our books of business, we’re going to need younger people to deal with our younger clients.”

As for the clients themselves, they’re facing more complicated financial scenarios. Additionally, most financial advisors do business with people between the ages of 50 and 70.

“It’s always been the nature of the business; people in their early life don’t have money,” he concluded. “They get married, have additional children and responsibilities, and build a home and fund their education. When they get to age 50 is when they start to add an accumulation of assets and therefore have to manage them responsibly. There have never been more 50- to 70-year-olds in the marketplace, and that number will only get bigger over the next 15 years because of the baby boomers. So the outlook for financial advisors is pretty bright, and we need them.”           


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