Apparently, the question “How do we recruit young, talented financials advisors?” was quite the hot topic at the recent TD Ameritrade conference in Orlando, FL. I wasn’t able to attend the event personally (making a note to be there next year), but I was able to get the commentary in real time thanks to Twitter and modern technology.
It’s no secret that the demographics of the financial advisory profession reveal that the majority of us are A) male and B) over 50. Naturally, I cannot speak from the viewpoint of a woman, but I do know that recruiting women to become financial advisors is a hot topic in our industry as well. That leaves us with the other topic–How do you get young, talented people interested? Here are my thoughts on this issue:
First, stop treating young people like indentured servants. I took my CFP® review course and exam with several other young professionals, each of us eager and excited to be involved in this industry. One young guy in particular had all of the qualities (at least externally) that a recruiter might look for in a new hire. The guy looked like Captain America–the perfect visual image for the extremely well-branded firm he represented. Yes, he still spoke like a frat boy at times, but nevertheless, he had a brain for financial matters. What interested me the most about him was the dynamics of his work situation, which, in my opinion seems to be norm in the bigger financial firms—he was basically a hired hand. His work day consisted of doing all the grunt work and planning minutiae of his supervisor so that his boss could then swoop in and look like a hero. Hey, I get it—those young bucks gotta pay their dues, right?
I have no problem with young advisors paying their dues, but what exactly are we teaching them? Most of what I hear is that they are learning how to have a job—how to be a technician. In my personal experience, the advisory business is a craft. It’s a people business, and you don’t get good with people by doing all of the work that someone else doesn’t want to do.
Secondly, stop the nonsensical myth that you have a training program. Wait–I’ve heard it before: “We have a training program that pays our people.” First, if your firm does have a training program AND it pays–BRAVO. That’s a good step in the right direction. What exactly does your training program teach?
In an article from 2009, Edward Jones advisors are apparently still being trained to go door-to-door. Tell me, in our culture, what is your initial gut reaction to door-to-door sales? I can tell you that it doesn’t appeal to young people. I don’t know that it appeals to anyone. I can tell you that for me, personally, if this was how the business had been presented to me–you couldn’t have timed how fast I would have made my exit. Side Note: If you are thinking that Edward Jones advisors are no longer encouraged to go door-to-door, I have 2 firsthand stories from clients in the last year about getting a knock from the local Edward Jones representative. One of them a fresh faced 20-something…I give him a year (tops).
I have another young friend, who is employed at yet another Wall Street firm. He actually interviewed with us last year as a potential new team member. By all accounts, he was a “success” from their training program. He was worried, though, because A) his training paycheck was stopping soon and B) the company had changed the payout structure they promised him when he signed on. That’s right—the ‘ol Bait and Switch. In essence, he wasn’t going to make enough money to support himself and his family after upholding his end of the deal. So, what’s he going to do?
As we talked through his philosophy about planning, he was concerned that the firm he worked at didn’t always focus on planning for the clients needs (shocking). However, he was very proud of his learned work ethic. “On good day, I probably make 150-200 calls”, he says. (I almost spit out my drink, which would have been embarrassing.) Naturally, once he did find his 1% of interested leads, his supervisor came in and did all the closing. So again, we have a young advisor who really functions more as a lead generation machine than an actual advisor. Do I even need to point out that, should my young friend leave, all of his existing clients are divided up and assigned to the upperclassmen? This business practice makes me sick— I mean, why would you worry about retaining and mentoring young talent if you can increase your AUM by absorbing the fees of the burnouts. Shame.
Next, understand the young generation is different than yours. The talented young advisors you seek likely grew up in a generation that received praise and participation trophies for everything. I’m not a fan of this practice, but unfortunately, that’s what we are doing to young people—They don’t know how to WIN because they don’t know how to LOSE.
Our business is tough. It’s a full-on competition from day one, and many young people don’t know how to deal with this type of environment. How do you communicate the positive side of the business? How do you show a blueprint for success, knowing that what worked 20 years ago is likely not going to work today?
Also, young people today are very in touch with individuality. People customize every single thing you can think of–from their cars to their cell phones. How does your firm encourage young advisors to be creative and individuals? How do you encourage them to find their own niche market?
Finally…I realize I will probably get some flack for this…but hear me out: Show them the money.
The problem is this–most payout structures I have seen are either very confusing, or they just suck. Everyone in business knows that the number one reason most businesses fail is under-capitalization, right? Does it not make sense that your top-tier talent is going to gravitate towards great compensation? I’m not suggesting that you break the bank, but what I am saying is: If you had to start over from scratch, would you take the payouts that you are offering the newbies?
Some examples from my own experience:
1) I used to work with a firm that provided absolutely ZERO marketing. Everything I wanted to do was encouraged, but I would have to foot the bill. This, of course, still meant that the house got to keep its share of any production. So, I have 100% of the marketing costs—50% of the revenue. Then, you subtract my self-employment taxes, regular taxes, and my living expenses. Does that sound like a cycle that has real chance of success in the long-term? FYI- my payout on AUM was even worse.
2) Speaking of marketing, just about every single marketing solution I see for advisors costs an arm and a leg. Sure, there are some solid solutions, but again, if the young folks have to foot the bill to marketing themselves—-can they even afford to do it? Not to mention, we have an entire industry that is built upon peddling marketing services to advisors. Guess what? If the marketing doesn’t work, it’s not them, it’s you.
3) True Story: I have a friend that works at a local institution that really wanted to expand their wealth management services and target higher net worth individuals. To do this, he needed to get some help because he’s the one man band over there. It’s a great situation, or so I thought. Apparently, his executive team wanted to expand by recruiting someone to handle all of the “busy” accounts, so he can focus on the bigger fish in the sea. Then he told me that they really didn’t have the budget to pay very much…possibly at all. Does this sound like a position a talented young person would aspire to have?
Bottom Line: You reap what you sow. If your business model thrives on the fruits of younger advisors, but you don’t have a way for them to grow roots, they will leave….and they will tell their friends about it. The opposite is also true. If you can offer a great compensation plan, encourage mentoring relationships, and truly develop the young lions….I believe you have a chance to keep them. And, they’ll tell their friends about that, too.