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March 31, 2014 at 08:00 PM
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.”
Training Tweaks
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.”
