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.