We hear a lot these days about “disrupters” in the advisory world. While it’s true that the independent advisory business is changing, there’s nothing “new” about dramatic changes in our industry.
Baby boomer advisors — the folks who own the largest independent firms today and who are on the brink of retirement — were the original disrupters. Along with the Vietnam War, the baby boomers experienced a massive stock market crash in 1968 and the near collapse of the U.S. economy in the 1970s, which included double-digit inflation rates and widespread gasoline shortages.
To help their peers deal with these challenges, some boomers created a new “client-centered” profession (financial planning) and a new anti-Wall Street business model (independent advisory firms). They focused on recommending inflation-beating tangible assets (gold, energy and real estate), and reducing clients’ taxes through sheltered investments — and they forever changed the advisory business.
Given this context, it’s ironic that baby boomer advisors, along with Gen Xers, are having such a hard time accepting the fact that with the coming of age of the millennial generation, the financial advisory business is once again changing dramatically. If these more senior professionals want to prosper in the future, they are going to have to change with it.
What follows are our suggestions for what today’s older generation owners need to do to give their businesses a good chance of surviving — and prospering — in the all too near future.
1. Hire millennial advisors.
Futurist Alvin Toffler (author of best-selling book “Future Shock,” published in 1970), said that “everybody lives in the past because we’re aware of very little that’s happening right now.” To get closer to the present, he suggested that we interact as much as we can with younger people.
When working with millennial advisors, there are some things to keep in mind. For instance, there are Certified Financial Planner (or CFP) registered programs all over the country that are shaping this talent. Also, those completing these programs know their talent is in high demand.
Most advisory firms today were designed to meet the needs of baby boomer and/or Gen X clients. While the Gen Xers are hitting their peak earning/accumulating years, most baby boomers are hitting their retirement/depletion phase.
To replace those clients — and their revenues — firms are going to have to attract millennials. That could be a problem. Why?
Millennials are as different from boomers and Gen Xers as boomers were from their grandparents and parents, who lived through the Great Depression. This means that most older advisors today are about as likely to understand millennial investors as their grandparents understood Led Zeppelin.
Unless your business plan involves closing the doors when your Gen X clients reach retirement age, you’re going to have to bring in some folks who understand millennial clients, which means hiring millennial advisors.
No big deal, right? You’ve been hiring young advisors for decades, and you’ll just hire some more.
But here’s something to consider: For years, existing advisory firms have been the “employers of choice.” Yes, a few younger advisors started their own businesses, but the majority wanted to go to work for established firms like yours.
Though that’s still true of some millennial advisors, these professionals also know that their skills are much sought after. This adds an interesting dynamic to an already limited talent pool.
But millennials are very different from baby boomers and even from Gen Xers. Most millennials got their financial education from the mortgage meltdown of 2007-2009. They are wary of Wall Street, know that real estate values can disappear overnight and don’t believe the government always will look out for them and fully protect their interests.
Consequently, like baby boomers back in the day, what they really want is sound financial advice from someone they trust. And they want something else, too; being the children of technology, they require that their advisor relationships be as user friendly as possible.
Of course, many millennial advisors know all this. Plus, they know that you don’t truly know it — meaning they also know that you (owners of existing advisory firms) have little or no chance of attracting and keeping millennial clients without them.
They also know that a growing number of millennial advisors already have launched their own low-maintenance, low-overhead advisory firms for millennial clients with great success. As a result, in their minds — and probably in reality — you need them a lot more than they need you.
Thus, traditional advisory firms have their work cut out for them if they want to attract millennial advisors to help them bring in millennial clients.
The good news is that like every generation, not all millennials are 100% entrepreneurial. They would prefer to work for someone else rather than launch their own business.
2. Lose the fiction that millennial clients don’t value financial advice.
The truth is that millennials value financial advice more than other generations — so much so that they actually are willing to pay for advice.
Today in fact, hundreds of millennial advisors are attracting thousands of millennial clients. If you don’t figure out how to compete with them, your business is going to have a big problem in the near future.
3. Understand and embrace the new advisory model.
If you think you’re going to attract millennial clients with your baby boom/Gen X business model, you’re making a big mistake.
The younger generation now wants different financial services, and it wants them delivered in innovative ways.