Millennials Essential
Many studies have shown that two-thirds of retirement advisory practices have no succession plan. This widespread failure among retirement plan practices to consider the future can be particularly troubling, as “the average age of all advisers today is 51, 21% are over the age of 60, and 50% are within 15 years of retiring,” says Richard Saperstein, managing director and chief investment officer (CIO) at HighTower Treasury Partners in New York City. “At the same time the existing adviser base is aging, the number of advisers is contracting; in 2000, we had 340,000 advisers, and in 2015 that had dwindled to 300,000.”
Overlay this with a “$16 trillion in wealth transfer that will occur over the next 20 years,” says Phil Simonides, group vice president at McAdam LLC, a financial advisory firm in Philadelphia. That means “we can’t replace the retiring advisers quickly enough,” he says. Millennials, those between the ages of 18 and 34, will be in the best position to attract and relate to their peers inheriting this money.
These factors call for retirement advisory practices to devise well-thought-out strategies to attract Millennials to their firms. There are means by which they can successfully do this, starting with offering a base salary as opposed to a commission-only structure, showing them a clear career path, creating teams and mentorship programs, emphasizing how much the industry benefits clients—being that Millennials are generally known as a group that wants to positively impact society—and offering state-of-the art technology.
“Millennials are not looking for the same compensation as Boomers,” says Anthony Domino Jr., managing principal at Associated Benefit Consultants in Rye Brook, New York. “Many Boomers entered this industry because they wanted to be entrepreneurial and work with a commission structure that would give them unlimited upside potential. Many Millennials don’t have the same drive for how high is up. They prefer a set salary, to do their job and go home.”
Michael Liersch, head of behavioral finance and goals-based consulting at Merrill Lynch in New York City, agrees. “They have different ideas about the income risks they are willing to take. Many of them want a salary as opposed to a production-based commission.”
A major reason for this, says Jordan Gales, a financial adviser with JMC Wealth Management Inc. in Chicago, and a Millennial himself, is because Millennials are saddled with student loan debt and want “some stability with their income.”
Given this group is less motivated by money than the Baby Boomers or Generation X, its members want a “work/life balance—to work to live rather than live to work—so giving them administrative support where they don’t have to know everything as they build their book of business, along with flexible hours, is important,” says Michael Valazquez, senior partner with Sadd Higashi Shammaa in Glendale, California.
“Millennials and Baby Boomers work very differently,” notes Nathan Boxx, director of retirement plan services at Fort Pitt Capital Group in Pittsburgh. “Boomers are more disciplined, 9-to-5 workers, whereas Millennials want the option to work remotely and have flexible hours because they are raising families and have young children.”
That said, Millennials are very motivated and want a clear career path, and this is important to emphasize in order to attract them, says Winnie Sun, managing director with Sun Group Wealth Partners in Los Angeles. “In the past, retirement advisers were content staying in the same role and doing the same task over and over,” she says. “Millennials want to have more than just one role. They are looking for growth and development.”
“A career path is critically important to Millennials,” concurs Jay Hummel, managing director of strategic projects and thought leadership at Envestnet in Cincinnati. “Many [retirement practices] don’t have the foresight to talk about a career path when recruiting talent—not just the job they are interviewing for but where they will be five, 10 years out. I see that firms with systematic career paths are the ones successfully attracting and retaining talent.”
Traditionally, retirement advisory practices have required advisers to work for 10 to 15 years before offering them a partnership and equity in the firm, Hummel says. While practices may continue to require that length of tenure for these rewards, they can still treat Millennial advisers like owners by providing them with “full transparency into the financials of the firm. This creates the feeling that everyone is part of the same team,” he says.
In line with this, firms need to provide Millennials with the opportunity to earn several licenses and designations, Simonides says. “This industry requires a significant amount of training and is very highly regulated; one thing Millennials are smart enough to know is that they want a firm with superb training,” he says.
Teamwork and Mentoring
Millennials welcome working on teams, as opposed to
individually building a book of business, industry experts say.
“The best synergy occurs when the older adviser teams up with the Millennial adviser to offer his years of experience in many parts of the business—[whether] investments, analysis, client management or operations,” Saperstein says. “The financial advisory business has become more complex over the past few decades. Today, it’s extremely challenging for one person to be great at all of the functions required. By joining a team, the Millennial adviser can specialize in a certain area but know that the other areas are covered by other specialists on the team. The future of the business is going to be driven by teams.”
“Collaborative learning” resonates strongly with Millennials, Liersch agrees. “Collaborative learning pairs them with a mentor and gives them an opportunity to see role models in action, ask questions and understand why the dynamics play out the way they do. Think of it as experiential learning—and that is empowering. Give Millennials the opportunity to take the lead on new projects.”
In fact, Merrill Lynch in recent years has restructured how new hires work, says Racquel Oden, managing director with the firm in New York City. “The way you traditionally entered the business through the past 50 years was through our traditional Practice Development Management program,” which requires each adviser to build his book of business gradually, on his own. Two years ago, Merrill Lynch augmented that with two additional, team-oriented programs: Team Financial Advisor and Bank Team Financial Advisor.
“With the Team Financial Advisor program, you are hired onto a team immediately,” Oden says. “You partner with a seasoned adviser on day one to drive a skill set [related to] planning, the investment portfolio or relationship management. What is really important about this is they come in with a special skill set but are looked at as part of the team.”
The Bank Team Financial Advisor program is another option Merrill offers new recruits entering the business, whereby they become part of a team at a Bank of America banking center, Oden says. On top of this, Merrill hires 250 interns every summer. “The summer intern program, the Team Financial Advisor and the Bank Team Financial Advisor programs are all anchored in teams,” she says. “We now have younger individuals joining our teams.” Currently, there are 1,600 people in the Team Financial Advisor program and 600 in the Bank Team Financial Advisor program.
Doing Good
In many ways, joining the retirement planning industry and
helping people achieve their financial goals is a natural fit for Millennials,
who “truly want to help those they are working with,” Gales says. “We grew up
during two large market downturns—the tech bubble and the housing collapse. We
have seen those we care about not be able to achieve their dreams and have to
make sacrifices for us. This level of empathy can be a very powerful tool for
an adviser.”
Richard Rausser, senior vice president, client services at Pentegra Retirement Services in White Plains, New York, echoes this thought. “Millennials want to make the world a more innovating, compassionate and sustainable place. What does this mean for advisers? Attracting Millennials to their profession is a natural fit. One of the key roles of a financial adviser is to build successful financial outcomes for his clients, whether that eventual outcome is retirement or another financial goal. At the end of the day, it’s always putting the clients’ interests first—especially if he serves as a fiduciary. Advisers who position themselves this way can make a strong case for attracting Millennial talent.”
Practices that focus on socially responsible or impact investing are also a good fit for Millennials, says Patricia Farrar-Rivas, CEO of Veris Wealth Partners in San Francisco. “We do environmental, social and governance [ESG] investing, as well as impact investing such as investing in companies where women sit on the board of directors or create products and services that support women,” she says. “Millennials are very attracted to all of this because it is solutions-oriented and helps resolve issues that weigh on their shoulders, such as climate change.”
Leading-Edge Technology
Being so tech-savvy, Millennials are keen to join companies
that have the latest bells and whistles, the experts agree.
“Millennials don’t just like technology. They love it and want to use it in everything they do,” Simonides says. “We employ custodians with the best technology, such as Charles Schwab, which has an app that allows you to transfer money [into your retirement account] and check the value of your assets.”
Account aggregation is another area Millennials look for, says Valazquez. “People want a dashboard that can show them how all of their finances are progressing,” he says.
Technology is an area where Millennials can be a tremendous asset to a retirement advisory practice. In fact, at Sun Group Wealth Partners, it is the Millennial advisers who inspired the practice to produce videos for its website and to reach out to other potential Millennial clients through social media, Sun says.
Taking Millennials’ various priorities into consideration, it is clear they can be a great addition to a retirement planning practice. They can relate to investors their own age. They are optimistic and genuinely interested in helping people. They are hardworking and adept at technology and social media—and they can bring new ideas and perspectives.
KEY TAKEAWAYS
- Millennials are not likely to follow the same paths as Baby Boomers or Generation X. Their concerns such as student debt and work-life balance make them are largely more interested in a steady salary than commissions, with the opportunity to hold various positions and for a steady career growth.
- They prefer becoming a specialist on a team to building a book of business on their own.
- Their genuine interest in helping people is a natural fit for helping people achieve a successful retirement.