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4 Next-Gen Advisors Reshaping the Industry

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A new breed of young financial advisor is redefining and reshaping the profession that has been popularly called “stockbroker” ever since a group of Wall Street businessmen began trading securities 200-plus years ago.

To be sure, social and historical events—especially the financial crisis—have played a major role in what has become, increasingly, a shift from broker to advice giver.

Indeed, today’s next-gen FAs come equipped with an eagerness to develop and maintain client relationships. Further, they’re keenly aware of the importance of empathy to foster bonds and know that trust-building is crucial. Notably, these men and women are not “salespeople”; “financial coach” more accurately describes them.

To compete with older-generation FAs and online do-it-yourself services, next-gen FAs are striving to acquire know-how and certifications to help market themselves as professionals in specialized areas, such as divorce or LGBT issues.

Certainly the use of technology, whether to facilitate and enhance client relationships or boost practice efficiency, is second nature to younger advisors, as well as with their young prospects—those with whom they hope to form sticky, long-term ties.

The need for new advisors is critical: FAs’ average age is 50.9, and more than 42% of all FAs are over 55. Hence, the arena is fast losing advisors to retirement—a third of them plan to exit within 10 years—or death.

Research recently interviewed four accomplished next-gen advisors, all based in the “alpha world city” of Los Angeles, the nation’s second-biggest metro area.

Here is some of what we learned about this quartet of up-and-comers:

Dimitry Farberov

Financial consultant; Comerica Wealth Management*; B.A., University of California, Los Angeles 2006

A 29-year-old who has no time for advisors whom he labels “sales guys,” Dimitry Farberov left the industry for 18 months because he disliked what he witnessed at his former firm.

“My disaffection with the transactional way advisors dealt with clients to make commissions and then essentially kicking them to the curb and never being there to serve their needs again really turned me off. It didn’t fit what I was looking to build as an advisor,” Farberov says.

At Comerica, he cultivates client relationships and, as part of a team of specialists, educates high-net-worth individuals on the crucial importance of retirement planning.

In a two-year training program, Farberov, who is pursuing CFA accreditation, has already spread his wings, regularly traveling a wide swath to 25 bank branches in LA and beyond to meet with clients and help change their mindset from short- to long-term investing.

Clicking with clients is key, he says. “Most firms offer the same investment management services for more or less the same costs. So it always comes down to relationships,” he says. “That’s the highest value we can provide.”

His target niche: helping non-profit organizations start or develop endowments.

“Young advisors are coming into a world where the value they can produce on a short-term level is very limited because of the access people have to low-cost or free investment options,” the FA notes. “Whereas retiring advisors were able to make money off a combination of short-term transactional business and accumulating assets over time, that’s effectively impossible for the young advisor today.”

Born in the East European country of Belarus, a grandson of Holocaust survivors, Farberov’s personal financial objective is “to not rely upon other people and companies to survive.”

He nourishes his entrepreneurial side by pursuing startup* ventures, one to provide lower-cost, or even free, Jewish education; the other, an online social platform to help busy moms keep physically and financially fit.

In a support job at Wachovia Securities during the financial crisis, Farberov found himself on the receiving end of panicky phone calls from clients who had lost as much as 40% to 60% of their assets in a month.

“They were looking to their advisors for help; but their advisors had already made their commissions and weren’t interested, or didn’t have the knowledge of how to deal with the situation,” he says. “It was a very shocking time. It changed my outlook: not to be a sales person but to be a relationship manager—a financial psychologist of sorts and to approach investing from a long-term perspective. It taught me to take advantage of opportunities in market [downturns], not to run from them.”

* – Editor’s Note: After publication of this article, Dimitry Farberov requested it be noted that he is a financial consultant with Comerica Securities, Inc. (Research magazine identified his employer as Comerica Wealth Management.) Secondly, Farberov wished to clarify that the startup ventures mentioned in this article are under consideration, rather than active enterprises.

Sean D. Muhlstein

Financial advisor/assistant vice president-investments; Wells Fargo Advisors (Wealth Brokerage Service); B.A., University of California-Berkeley 2004*; CFP

Graying hair and balding pate—signs of aging but also comforting cues that, to prospective clients, signal experience.

“I didn’t have gray hair or lack of hair when I started out, so I had to compensate for my youth by acquiring knowledge and designations—knowing my business inside out,” says Sean Muhlstein, 32, based in a bank branch. Early on, he earned the CFP and accredited domestic partnership advisor (ADPA) designations.

The tack worked: In the midst of the financial meltdown and shortly thereafter, Muhlstein built a $30 million book.

“A lot of people were bank clients [at Wells Fargo predecessor Wachovia] with investment accounts elsewhere that were hemorrhaging value. They wanted to stop the bleeding,” recalls Muhlstein. He stepped in. “It was a slow and steady process, with a lot of very low volatility, unsexy investments and a lot of long-term trust-building.”

His clients range widely in age from 19 to 92. After covering branches in Brentwood, Malibu, Santa Monica and West Hollywood, Muhlstein has now settled into one in the populous Pico-Robertson neighborhood.

Lots of young prospects live there, but it is a demographic that has its challenges. Generation X and the millennials are wary of putting their money into others’ hands—and the option of Web-based do-it-yourself investing beckons.

“People in their 20s and 30s are terrified of institutions. There’s a lot of distrust of the system and a sense of: ‘I can’t rely on anyone else,’” he says. “Five years out from the financial crisis, there’s still a wall of suspicion that you need to work through to build trust.”

Muhlstein does that by assuming the role of client CFO. “Advisors are no longer the gatekeepers of information because people can do their own buying and trading. So it’s not, ‘Hey, I can make you 6% a year’ and then show them a couple of mutual funds. It’s goal-planning-based and about the intentions of the money,” says the FA.

Born in an LA suburb, Northridge, Muhlstein spent a year at an Israeli university, Bar-Ilan, before enrolling at the University of California, Berkeley, where he majored in liberal arts. After graduation, he worked in the movie industry for a while but, disenchanted, decided that financial services would be more to his liking.

When the meltdown came, he’d been at Wachovia for two years. “I realized how much of the job is about being clients’ financial therapist, talking to them through their fears and anxieties and,” he says, “also trying to provide solutions and ways to reduce those fears.”

Keeping promises is a prime component of Muhlstein’s work ethic.

“I try to exude that characteristic and let clients know I’m there for them,” he says. “You’ve got to go above and beyond. That’s what I think it takes to be a good advisor.”

* – Editor’s Note: Muhlstein’s graduation date has been corrected.

Marc L. Russell

Co-founder-principal; AdvicePeriod; B.A., Amherst College 2005; MBA, Wharton School 2013; CFA

Little did Marc Russell know that, when he transferred seven years ago from Convergent Wealth Advisors in Washington to help open the independent’s brand-new LA office, he would be swiftly catapulted from a support role into his future life as an advisor.

Two senior FAs in LA didn’t work out; Russell was able to fill the vacuum. In short order, he emerged as a lead advisor, developing his own book of business of ultra-high-net-worth clients and soon rising to the post of managing director.

Now, at 31, he is part of a triumvirate of Convergent advisors, led by his mentor, firm founder-chair Steven Lockshin—who is ranked by Barron’s, for the last three years, as one of the top three FAs in the country. In January, the advisors launched an RIA, AdvicePeriod, to which they are transitioning their clients.

Russell, specializing in complex estate and tax planning, focuses on a niche of successful professionals in their mid-30s to late-40s who are moving into the ultra-high-net-worth world.

“What differentiates these clients the most is that they want the convenience of technology. They don’t necessarily need face-to-face meetings on a regular basis. They’re more interested in accessibility when they need it,” says Russell, reared in Essex, Vt., who began as a college intern with Convergent’s predecessor firm, Lydian Wealth Management, founded by Lockshin.

Now, “in some ways, my job is being a psychologist to help clients understand the appropriate amount of risk they should be taking,” Russell says. “Younger individuals are very skeptical about investment managers who claim they’re going to beat the market with stock-picking strategies. I help clients understand that we’re managing uncertainty over a long period. Investing isn’t about finding a great deal; it’s about having a plan to reach very specific objectives. If you can’t understand what those are, you’re not going to be successful as an advisor.”

Later this year, Russell and partners are teaming up with Betterment, best known for a Web-based direct-to-consumer investing platform, to kick off a business separate from AdvicePeriod: Betterment Institutional. The new platform is designed for retail advisors to use in investing smaller clients’ assets.

Says Russell: “The [advisory] solution that’s going to win the day will combine a very [robust] technology platform with a human presence.”

The uniquely human traits of trustworthiness and empathy are among Russell’s big strengths.

“Those two are more important than anything else,” he says. “People need to know you’re working for them. In the future, financial advisors are going to have to constantly justify their existence. The lazy ones who aren’t doing much for their clients will be pushed aside and disintermediated by the do-it-yourself options out there.”

Ashley Warne

Financial advisor; Corporate Financial Partners; BD: Raymond James; B.A., University of Southern California 2006; CFP, CDFA

Corporate Financial Partners’ dynamic-duo FAs have been a team for three years now. They have been parent and child for 30.

“My dad introduces me as his partner, and also his daughter,” says Ashley Warne, who one day will take over the family enterprise.

Dad is Philip Warne, who has been an advisor for more than four decades. Ashley joined his independent practice after 18 months in Raymond James’ residential advisor training program in St. Petersburg, Fla.

Right now, the two work in tandem on all accounts: a diverse group of corporations and high-net-worth entrepreneurial individuals.

“My dad has been a great mentor. He immediately threw me into the fire on every case because he knows that nothing takes the place of human interaction and helping clients through the process,” notes Warne, a Los Angeles native.

As a young, female advisor, she has allowed neither youth nor gender to get in the way of forging a career.

“When I go to conferences, there aren’t a lot of people there that look like me—they all look like my dad,” she says. “I don’t pretend to be a 65-year-old man; I’m comfortable being a 30-year-old woman. But I take the business as seriously as an older advisor would.”

Why aren’t more young folks flowing into the advisory business?

Warne thinks it’s because “people studying finance [in school] aren’t even sure what being a financial advisor is about. They think it’s, maybe, a lot of sales and pushing product. They don’t know it’s about relationships. Being an advisor is growing with people, their families, their businesses. You become a critical part of someone’s life and travel the road with them,” she says. “It’s certainly a great business for young women.”

Rather than zeroing in on potential clients of her own generation exclusively, Warne, who holds the certified divorce financial analyst (CDFA) certification, prospects broadly.

“I’m going where the money is and where the needs are,” she stresses. “But I do have some younger clients. Many single people in their 30s who are making quite a bit feel they should be doing something with their money. They’re getting ‘pushed information’ from the Internet and seeing ideas on Twitter. So they’re curious.”

Sidebar: Advisory Help Wanted

At a time when baby boomers require critical advice, 32% of the nation’s FAs plan to leave the business over the next decade, according to Cerulli Associates research.

The need for advisors—especially younger ones—is particularly acute in the independent BD channel, which versus others, has the highest percentage of FAs over age 65 and only 6% of FAs younger than 35, Cerulli reports.

The good news is that in 2014 “Financial Advisor” made Kiplinger’s list of “10 Best Jobs” in the country for a second year in a row, drawing on U.S. Bureau of Labor Statistics 10-year employment projections.

What’s more, the list ranks FA as the job with the second-highest earnings potential. (No. 1 Best Job? Health specialties professor.)