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Financial Planning > Behavioral Finance

Where is the next generation of financial professionals?

By James Shagawat

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In the 1960s, the Beatles questioned what it would be like “when I’m 64.” Well, the surviving Beatles are in their 70s, and most of today’s financial advisors are past the age to “twist and shout!” Various surveys report that the average age of agents and advisors is 55 or more. A critical question for the financial services industry is “who will fill their shoes?”

The next generation of financial professionals

Exacerbating the issue of aging and retiring advisors is that huge numbers of Americans are marching toward retirement. With some 77 million baby boomers (and by the way, the youngest boomers reach 50 this year!), and nearly as many Generation X’ers, there are far too few advisors to provide professional advice to so many who need it.

Then, there are millions of younger Americans, Generation Y or millennials (those born in the early 80s through the early 2000s), who are beginning their careers and starting families. These younger people need advice on 401(k) plans, IRAs and Roth IRAs, and the financial risks that they face. These people need to understand the value of their human capital — the potential to earn income over their working life. They need to be educated and encouraged to convert their human capital into financial capital in the form of savings and investments.  

Sadly, many millennials are shunning the equity markets in the aftermath of the Great Recession of 2008-09. They are forfeiting their opportunities for a more secure retirement by over-allocating fixed-income vehicles in lieu of equities. It is not an understatement to say that the future of the financial services industry, as we know it in 2014, depends on reaching these younger Americans, winning their trust, and providing the products and services they need.

While younger Americans (and others) are hooked on their smart phones, iPads, and computers, complex products such as permanent life insurance and annuities generally are not suitable for sales through the internet or via slick marketing videos. The face-to-face meeting between client and advisor will still be necessary to explain complicated products and encourage or discourage their purchase, depending on their individual financial situation.

Today’s customers are inundated with financial information, causing a “paralysis by analysis” resulting in no action at all. Throw in the myriad “financial experts” who characterize permanent insurance and annuities as everything from “financial anathema” to “financial magic” and we understand why the public becomes confused and stymied.

Millennials are a good fit

While I do not claim to have all the answers, it is clear we must recruit, train, and retain young advisors to meet current needs and fill future advisory roles. Here are a few conclusions I have made in observing and working with the younger generation.

  • Many millennials are service-oriented and have grown up supporting good causes, perhaps more so than previous generations. Their willingness to serve others can be tapped and strengthened by serving the public as a financial advisor.
  • Millennials grew up in a high-tech environment. As someone has correctly ascribed to them, they are “technology natives” instead of the “technology immigrants” of older generations. Millennials understand the new media and can comfortably communicate with their peers.
  • Most millennials are “tight” with their own families. Yes, some have had “helicopter parents,” but millennials generally love their parents and appreciate what they have provided in opportunities. They want to see their parents prepared for the future in terms of life insurance, investments, and retirement planning.

What millennials need from the industry

We frequently hear companies bemoaning their difficulty in hiring and retaining younger advisors. As the financial services industry recruits more millennials, I believe there are several key insights for their training and development:

  • Industry leaders must understand the differences between generations. Baby boomer and Generation X bosses need to understand and appreciate the personalities and values of the millennial advisors.
  • Bosses must know that loyalty is a two-way concept — both up and down the organizational chain.
  • Accomplishments of young advisors need to be recognized and rewarded. If they can do the job, their age should not hold them back from promotions or recognition. 
  • Young advisors will need extensive professional education. There is so much that they do not know, and the body of professional knowledge grows daily. Young advisors must acknowledge that fact and pursue the education needed to be respected professionals within the financial services industry.
  • Young advisors will need strong mentoring programs. We all know that there is a “cost to mentoring” in terms of time, opportunities, and money. On the other hand, there is a tremendous future cost of not mentoring the younger generation of advisors. By creating close partnerships and teaching young advisors what you know, we will be in a position to help support — and perhaps salvage — our companies in the next decades.
  • Industry leaders must not let millennials’ relative youth prevent them from getting the support they need to be successful. I do not believe the “hire 100 advisors and hope 10 will survive” approach is workable any longer (if it ever was!).

There are many millennials who are ready, willing, and prepared intellectually to survive and thrive in this business, given the corporate investment, training, and support that they need.

See also:

10 ways to make the millennial connection

4 ways to sell Millennials on benefits

When I’m 65 [Infographic]

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