Journal of Financial Planning: December 2014
It’s no secret that the financial advisory industry, which has been largely set up to help people save and plan for their retirement and future, is aging rapidly; more than 50 percent of advisers today may be looking at their own retirement soon. For those who have built a successful practice, the question of what to do next looms large. Succession planning can involve anything from selling client assets, to merging with an acquiring firm, to hiring a successor.
Many advisers want their legacy to live on and are bringing in new talent long before their own retirement to cultivate young professionals who will be able to manage the business at some point. Yet, the generational divide can be great. A notable chasm exists between the working style of the baby boomers and the working style of the next generation—the 20- to 30-year-olds of today. Technology is the biggest difference, of course, but the changing face of the financial industry over the last 20 years is also a factor. How can older advisers bridge the gap and give their younger staff the tools they need to succeed in the business?
Obstacle: Times are changing. What worked to build a financial advisory practice 20 to 30 years ago may not work today. Back then, there were not as many professionals vying for wealth. Today, the insurance sales executive, the banker, the broker, and the financial planner are all saying they are “wealth managers.” Anyone entering the business today will encounter a competitive environment and a confusing marketplace that only seems to be intensifying.
Solution: Instead of asking your younger staff members to “model” your behavior, or instead of having an expectation that they will do things the way you did, work with them to identify ways of growing the business or finding new clients that fit today’s market. This could include ensuring they know how to tell the firm’s story effectively, or having them leverage social media, or start a company blog. Give them the tools they need to confront a changing and competitive environment.
Obstacle: In many cases the role of the younger team members is unclear. He or she might be charged with doing many things such as working with existing clients in a side chair capacity, to forging relationships with COIs, and forming alliances independently. The requirements and measurements may change from time to time, making it difficult for them to understand what success looks like in their role.
Solution: Be clear, in writing, about your short- and long-term expectations. It’s not about just having a job description, but rather setting milestones and objectives for success. Review these expectations with younger team members on a regular basis—more often than just the annual performance review. Check in to see what’s working and what’s not, and offer real-time feedback.
Obstacle: Many older employees worked very hard and expected few accolades. The younger generation has grown up receiving more “atta boys” and “atta girls” than baby boomers may ever have received. This creates a rift because of expectations about the “right” way.
Solution: Know your audience. To motivate and encourage your next-generation leaders, you need to understand what makes them tick. Instead of falling into the trap of “I never needed that,” or “That’s not what is important,” assume that you might not know what’s meaningful to them. You might have to step out of your own comfort zone and give public recognition for a job well done, or circulate an email congratulating an employee on his or her accomplishment. Being seen, known, and appreciated matters to most next gen staff members; find ways to feed this need.
Obstacle: Many older advisers don’t want to be told how to do something differently in their firms. They may be making good money, keeping large amounts of assets, and enjoying satisfied clients. “If it isn’t broken, why fix it?” can be the mantra. Unfortunately, for the next gen staff, this means there are few, if any, opportunities to give meaningful input. They may become frustrated by their inability to make change happen.
Solution: Recognize that although things may be working very well, nothing was ever created without some change, resistance, and risk-taking to try something new. No firm, large or small, can develop into a successful venture without making mistakes or trying new things to see what works best. Your younger team members will see things you don’t see. They have a different life experience, which leads them to filter things differently. Give them opportunities to have a voice.
When making a decision, seek their input and ideas. Hold forums where younger team members can brainstorm ideas, and then create plans for implementing them. You can hold the final decision on making any change happen, but if you stem the flow of new ideas, you might miss out on something that could be very beneficial to the practice.
Obstacle: Many older advisers have a “let ’em earn their stripes” attitude. Although there may be nothing that replaces experience, in many cases, younger, recently educated staff members bring fresh ideas that may be overlooked because of their youth. If a smart person is overlooked for too long, they will either begin to doubt themselves and lose confidence, or start to look for employment elsewhere.
Solution: Hold general meetings where all team members come together to talk about the business, the competition, and the clients. The next gen staff members can’t learn without exposure. If you assume they can’t participate until they have enough experience to do so, it defeats the purpose of bringing on new team members, and you may as well just hire older, more experienced people. Create an environment with open forums to listen, to learn, and to share when appropriate.
Obstacle: In work cultures of some established firms, stimulating and collaborative opportunities for next gen staff may not exist. The environment could feel stifling or isolating to the younger team members. In some cases, there is only one younger team member, so there will be fewer opportunities for like-minded discussions.
Solution: Encourage and support—both practically and financially—your next gen staff to join outside groups and engage with others of their age and professional situation. This could be a local networking group or club, or it could be introducing them to the younger staff members of outside firms, such as accounting or law firms you have worked with for a while. Try not to just bring them along on a meeting with someone you have known for a while and who may be in your age category, but rather work to facilitate an introduction with the next generation staff of those firms where you have connections. Support paying for dues or registration fees to organizations and events where next gen staff can mingle with others of their age range. FPA’s NexGen community offers a variety of networking and educational events for planning professionals age 36 and younger.
Obstacle: Next generation staff members need time to build their own book of business and create referrals within a client base. Older advisers might expect younger staff members to be out there hunting for new opportunities and finding them, because that’s what they did. It isn’t simple to find high net worth investors in the first place, then to bring them along to become a client, and it’s even more difficult for someone relatively new to the process.
Solution: Provide coaching, mentoring, and training to the next generation staff members. Help them create their own business development plan, which may take a year or two, or even more, to implement. Put the focus not on short-term wins, but on longer-term development.
Create an environment for learning, and help to facilitate that learning in as many ways as possible. Even the most seasoned advisers can struggle with finding new business, and it’s much harder for those who have not had as many years of experience. Recognize this and find ways to provide ongoing, hands-on support to help them learn and grow.
Obstacle: Next generation staff members might lack confidence. For younger planners, it can be difficult to sit in a meeting with the gray-haired, highly regarded, seasoned advisers and feel like you have anything of value to add.
Solution: Create agendas that bring the younger team members into the discussion. Give them something to research and present, or find a piece of the overall financial plan they can present. Don’t wait for them to grow and contribute; proactively find ways for them to do so.
Developing next generation leaders takes three things: focus, clarity, and consistency. If you seek to have trained and satisfied next gen staff, throwing them into a role and expecting them to figure it out, because that’s what the older generation did, is not going to achieve the results you may need. Consider implementing one or more of these best practices for your next generation staff, and see if you can’t increase the short- and long-term results of your younger team members.
Beverly D. Flaxington is principal of The Collaborative, which, along with its division, Advisors Trusted Advisor (www.advisorstrustedadvisor.com), is a consulting, coaching, and training firm exclusively serving the financial industry.