Millennial advisors who entered the business after the outset of the recovery from the financial crisis had, until recently, spent their careers enjoying a remarkably smooth and upward-trending investment environment.
Both U.S. stocks and the domestic economy outperformed the rest of the world for the better part of the last decade. However, we’ve seen volatility return to the stock market over the last two quarters, with many analysts predicting that the economic expansion is in its late stages.
With volatility on the rise and returns likely to be lower compared to the recent past, clients who have not confronted this type of environment in years may want — and need — their advisor to offer more hand-holding. This probably will require millennial advisors to make three adjustments as they address client concerns.
They will need to get counsel from mentors who have lived through previous bouts of volatility and market downturns, fully leverage a team-based approach and consult with working groups in their professional network to share best practices. This way, instead of trying to fly solo, millennial advisors still will be able to operate at scale while also rising to this new challenge.
Learning From Mentors
Younger advisors have two significant incentives to seek the mentorship of experienced advisors who have survived choppy markets. Mentors can show millennial advisors what behaviors to expect from clients, and from client portfolios, as markets swoon.
Millennial advisors also can point to the presence of mentors when reassuring clients they will in fact be able to successfully oversee a portfolio during what, for the younger advisor, may be unprecedented levels of volatility.
Mentor-mentee relationships may call for the younger advisor to swallow his or her pride. A young advisor can be tempted to tell clients the advisor is fully equipped to navigate challenging financial markets alone, but that can be small comfort to older clients with significant assets at risk.
Older advisors, meanwhile, should be ready to share their wisdom and experience to help the firm retain assets.
Otherwise, the possibility increases that skittish clients will seek a different advisor or hoard cash as returns falter. And there is always the chance that, without enough oversight, younger advisors might overestimate their portfolio management skills once the good times fade.
Leveraging the Team
During volatile markets many clients prefer increased communication from their advisory team. Providing an “all-hands-on-deck” experience from multiple professionals can allow for greater scale than a younger advisor constantly being on duty for every client phone call and email.
This is where support staff and sales assistants can be a great resource. They can share pre-approved market research, product communications, schedule in-office meetings, clarify account details, arrange events or seminars, onboard new clients, and have conversations with clients that can save millennial advisors precious time.
Depending on the compliance policies of the firm, support staff and sales assistants may also handle the practice’s social media presence and text messages from clients. Although these tech-based tools expand advisors’ real-time reach, allowing them to share thought leadership and personal touchpoints with a wide audience, maintaining the content pipeline can be distracting for younger advisors who also must stay up on shifting market dynamics and more immediate revenue-generating activities.
Properly executing the team-based approach requires both junior and senior advisors to give support staff and sales assistants clear direction on protocols and assignments. This should include what to say and what not to say to clients, when to conduct specific tasks and when to escalate issues to the advisor, as well as educating the team on market volatility or economic developments that might affect client portfolios.
Millennial advisors gravitate toward sharing best practices and past experiences within peer networks or working groups, as opposed to learning how to build a book of business through solitary trial and error. Firms that facilitate such groups improve the dissemination of knowledge among younger advisors, something that is especially crucial during periods of lower portfolio returns.
The goals of in-network consulting may differ from firm to firm or even advisor to advisor, but millennial advisors facing volatility for the first time would do well to seek insights from successful peers on a few common issues.
Some examples are: how to keep antsy clients calm as losses mount due to macro force, how to diversify portfolios in ways that mitigate those losses, and how to bring on new clients despite dim prospects for near-term portfolio gains.
Market instability always brings unwanted obstacles, but it is inevitable. Younger advisors can look at increased volatility as an opportunity to deepen bonds with clients and continue growing with scale. They can accomplish this by leveraging the full capabilities of their team members to emphasize long-term financial planning over short-term gains, while using the experiences of older mentors and successful peers to engage positively with clients.
Cristi Meyers is a practice management consultant with ProEquities, a financial services firm based in Birmingham, Alabama.