Seeking Out New Talent
According to Fidelity Investments, only two out of 10 college students and young professionals surveyed for its 2014 “Recruiting Redefined” study said they were familiar with the adviser profession, and more than six in 10 could not name a single firm that employs advisers.
After learning some basic facts about the industry, however, nearly half of the young people surveyed said they would consider a career as a financial adviser. This is good news for advisory firms, considering that more than four in 10 advisers are either at or approaching retirement age, according to research from Cerulli Associates. In “Advisor Metrics: Understanding and Addressing a More Sophisticated Population,” the Boston-based research firm finds the average age of financial advisers is just under 51 years. The report says 43% are over the age of 55, with nearly one-third falling into the 55 to 64 range.
The increasing average age of advisers is affecting each advisory channel differently, the report shows. Broker/dealers (B/Ds) especially are struggling to recruit new, young advisers to offset those leaving for retirement, but independent advisory firms are having a difficult time, too, Cerulli says.
One of the few solutions to the age problem is to ramp up recruiting efforts among Millennials, Fidelity finds. But how do advisers successfully enlist recent college graduates to join their practices? And how do they train and equip them for success? Fidelity says its study identifies key steps for firms to take to attract and retain Millennials in the retirement plan advisory profession.
The first is to focus efforts on wider resource pools. Researchers found potential talent may be working or studying in adjacent fields beyond just finance—many of the skills necessary to become an adviser are exercised in other professions. Candidates who already have a certification may be perceived as more desirable, Fidelity says, but the data suggest young professionals in related jobs—such as insurance and commercial banking, for example—may be qualified if advisory firms provide them with a pathway to success.
Fidelity finds 91% of young professionals surveyed say they would consider taking a new job in the short term if it seemed like a good opportunity, whether in or out of financial services. This figure held across banking, insurance, technology and scientific services. Advice professionals recruited from these fields appear to thrive with proper training and support, Fidelity says.
Perhaps most important, the research finds that a key recruiting tactic is to tone down the sales aspect of the job: Among the top reasons candidates surveyed said they would not consider becoming an adviser were “too much pressure to sell” and “working on commission.”
“The truth is that the looming talent shortage in the advice industry is no longer looming—it’s here, and the typical approach to recruiting is no longer effective,” says Jylanne Dunne, senior vice president of practice management, Fidelity Institutional Wealth Services, in Boston. “It’s time that we redefine our recruiting efforts so we can begin to make real progress that could benefit the profession in the long run.”
Creating a Path for Millennials
Nick Della Vedova, president of NFP Retirement in Aliso Viejo, California, agrees with the message that more young people need to be pulled into the financial advisory industry. But he is quick to add that, in most cases, a 20-something recruit will likely be ill-equipped to immediately step into an adviser job.
“For NFP, one of the hallmarks of our recruiting effort among Millennials and young people is our college internship program,” Della Vedova says. “We started our program about five years ago, bringing in two interns at a time, and it’s now up to four interns that we bring in each summer.”
Della Vedova says NFP Retirement shaped its internship program to give young people a chance to get their feet wet in the advisory space. “We feel it’s been a very successful effort for us.” By this, he means that the interns first work in operations and eventually graduate to more challenging roles. He adds that, so far, the program has concentrated on a limited number of schools, including University of Pennsylvania, Boston College, Rice, Michigan State, Purdue, University of Oregon, and University of California, Los Angeles and Irvine campuses.
“One major benefit of focusing on these schools has been that we have basically created pipeline[s] of young adults from the same schools, who share information and build excitement around this program through word of mouth,” Della Vedova says. “It’s a presence that we are able to build up on the campus, and it gives us an opportunity to hire some of these newly minted college grads into the operations aspects of our business.”
Mark Ratay, a longtime adviser and head of the Ratay Group at Morgan Stanley, in Lisle, Illinois, also thinks recruiting interns on college campuses is a great way to attract young talent. “One of the challenges in doing this is that many of the people who apply for internships are juniors and seniors in college, so they don’t have much time to stick around,” Ratay says. “There’s enough time to teach them, but is there enough time for their presence to benefit the firm? That’s something you’ll have to overcome in a program like this.”
Both Della Vedova and Ratay suggest that folding Millennials into firm operations instead of client services right off the bat can be a partial solution to this problem: It gives the interns a chance to learn the basic advisory industry functions first and prepares them to more quickly learn the business from the ground up. The interns may be called on to help with a wide variety of tasks, perhaps starting with investment reviews and request for proposal (RFP) responses, then move to benchmarking reports and compliance, and finally to client service and sales.
“Throughout the process, these individuals are also constantly encouraged to work on their presentation skills, and they’ll start working with clients in a support role, or they may even take charge of delivering information for a set of clients,” Della Vedova explains. “After working with us, doing this for a whole summer, they are able to come away with a strong base of knowledge and presentation skills that allows them to move forward on becoming an adviser.”
Ratay urges advisers to “realize upfront that this is a complicated industry, and it’s going to take some time for an intern to learn it.” Perhaps this will lead advisers to hire some interns part time for the whole school year, rather than full time just for the summer, he notes. “The longer you keep these people around, the more successful they can be.” On-campus career counselors are a tremendous resource for identifying and contacting talent at local colleges, he adds.
You Scratch My Back …
Della Vedova says these Millennial interns, especially the ones who go on to start their career in various roles with NFP, bring refreshing engagement with new tools and media, as well as a willingness to dive headfirst into a rapidly changing industry.
“They’re willing to embrace technology, as they’ve grown up with it from Day One,” he says. “Millennials recognize that technology is such a powerful way to allow us to get so much more done with the same amount of resources. That’s something Millennials are very keen on, and, candidly, the energy young people bring to the firm is a great benefit, from that perspective.”
Della Vedova says the Millennials he talks to about internship opportunities obviously feel compensation and room for advancement are important. But, even more than older generations, he says, young professionals entering finance and other fields consistently cite the importance of work/life balance in making decisions about where to work.
“They say they want to be passionate about work and what they do every day,” he says. “They want to have work/life balance, so when we are able to make the case for why that is possible in the advisory industry, we do even better in our recruiting.”
Della Vedova’s other main piece of advice is that advisory firm leaders need to remember there is “a pretty important distinction between recruiting and retaining young talent.”
“To get people to stay, you must have a robust opportunity for the team members you have in place—young or old,” he says. “They need to see that they are part of something that’s growing and will continue to grow. Compensation growth is part of it, but there are some less common-sense elements that can help you keep younger talent happy.”
For example, NFP Retirement has found Millennials really want to contribute to the overall success of the company. “They don’t need to be put in charge of a big team right away, but they want their ideas to be listened to and implemented when feasible,” Della Vedova observes. “Whether or not most of their ideas are executed on, they want a strong voice in the company. You want them to feel like part of a collaborative environment.”
Running Out of Time
In its own research on adviser recruiting needs, TD Ameritrade Institutional says it is expecting more than 30% growth in demand for financial advisory services during the next decade—nearly twice the growth rate of all other occupations, as measured by the U.S. Bureau of Labor Statistics’ “Occupational Employment Projections to 2020” study.
“If we don’t change the course we’re on, there’s a very real threat there won’t be enough young people entering the field to meet the growing demand for financial advice,” warns Tom Nally, president of TD Ameritrade Institutional in Dallas. “An internal succession transition can take up to 10 years to implement, which is why it’s so important that we engage students now and raise awareness of a great career opportunity.”
To meet this challenge, Nally says, TD Ameritrade created its RIA Intern Network, a program that seeks to facilitate mutually beneficial relationships for registered investment advisers (RIAs) looking to fill entry-level roles and students preparing to enter the work force. By attracting tech-savvy interns to their firms, TD Ameritrade says, advisers can be in a better position to capitalize on the generational transfer of wealth from Boomers to Gen X and Millennial investors.
Under the program, TD Ameritrade Institutional provides support and guidance to help RIAs build an effective training and development program within their firms. Students and advisers can connect through an online portal to post résumés and internship opportunities, while a dedicated LinkedIn page connects participants for social networking.