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Practice Management > Building Your Business

4 Ways to Add Next-Gen Advisors to Your Practice

By Todd Rebich

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The wealth management industry has an ongoing issue attracting and retaining next-gen financial advisors.

According to Cerulli, after years of targeted recruiting efforts, the average age of advisors remains in the mid-50s, with less than 10% of advisors under the age of 35. What’s more, 40% of advisors are projected to retire over the next decade.

If we can’t turn these demographics around quickly, this is a real problem for the investing public who will have less options for trusted financial advice. Firms’ growth prospects could also be in jeopardy.

What the wirehouse firms, regionals and large broker-dealers have been doing to recruit younger advisors and help them succeed in the business, hasn’t moved the needle enough.

The solution may lie with smaller independent offices making the effort to hire and nurture next-gen advisors one at a time by focusing on two related themes: feeling valued and compensation.

Prioritize Pay

Compensation is a critical aspect of attracting and retaining next-gen talent. Plenty of young people join the industry, only to wash out because they can’t make a living in the early years. This can lead to frustration and burnout, causing promising young advisors to leave the business.

To get the right people in the door and keep them engaged while they get their sea legs under them, you need to establish a generous, thoughtful compensation package.

Consider putting your advisors on salary, so no one is worried about making a living. Unfortunate things can happen in this business when people are struggling financially. Working on commission, especially in the early years, often means long hours for little reward.

Consider Bonus Pools, Equity

Think about allocating a portion of your firm’s profits to a quarterly bonus pool. All employees, from admins to advisors, should be eligible. Bonuses can be determined by tenure, performance and accomplishments. This ensures that everyone is working toward the same goal since they all have skin in the game.

Next-gen employees expect benefits, so provide everyone with a full package, including medical, dental, vision, life and disability insurance, a 401(k) with a match and maybe even an employee profit sharing plan.

Depending on your circumstances and succession plans, you may want to allow young advisors to build up equity by buying a small percentage of the company each year. This is a great retention tool that rewards an advisor’s loyalty and allows them to make plans for their future.

Focus on Workplace Issues

Today’s younger generation needs to feel a real connection to their workplace. They want to be treated with dignity and need to believe they are making a difference in their communities and the world. If you are running your own independent firm, you can shape an environment that next-gen advisors want to work in.

Make work an enjoyable experience. Whether it’s casual dress or providing opportunity for frank, open conversation, make sure your employees know you appreciate all they do. Be generous — if it’s within your office’s budget, cater in lunch during the week so your employees don’t need to leave their desk.

But always remember employees and clients can smell a phony, so be sincere in your actions.

Respect your employees enough to ensure they are well trained. Training has received less attention over the years. Advisors need to know more than investing, they need to know the basics of sales and marketing. You need to help them, especially in the early career years.

 Just as advisors need to “know your clients,” as the head of your firm, you need to get to know your staff. By knowing their goals, when they are struggling and what motivates them, you can help them succeed in this often-stressful business.

Act Soon

As an independent business owner, you have control over your firm’s culture and compensation. Use that control to create a compelling value proposition that will attract the best and brightest new talent.

Bringing the next generation into the business and setting them up for success is not only good for the industry, but it could also be critical for the future of your business and the well-being of your clients.

New advisors take some work, but the right next-gen advisor can help you achieve your growth objectives, better service your clients and smooth your succession when the time comes.

Todd Rebich is president of Rebich Investments, affiliated with Stifel Independent Advisors.

(Image: Shutterstock) 

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