Angie Herbers has written for IA since 2005 on how to bridge the gap between the planner generations. Her blog will provide direct, to the point advice to both the principals of established firms in finding and retaining the best talent for those firms, and to those talented newcomers themselves on how the groups can together build firms—and a profession that will endure.
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I just got back from the FPA NexGen conference at St. John’s College outside of Minneapolis and it was great. I couldn’t get over how different it was—and better—than the last one I attended two years ago. Mark Tibergien and Dick Wagner gave speeches, and moderated panels; both were great, but the rest of the conference was essentially conducted by NexGeners themselves. In fact, in contrast to years past, very few non-NexGen advisors showed up at all. Not that there’s anything wrong with “older” advisors (some of my best friends…), but there’s something about having a conference for NexGen advisors, by NexGen advisors that really worked. Not only for me, but my sense was it worked for the other attendees, as well.
I think the NexGen conference really fills a need in the advisory industry.
I usually don’t comment on advisor politics or regulation. For one thing, it rarely impacts practice management, and frankly, I just don’t have the time to think about it. And there are plenty of folks who regularly cover that beat. But the CFP Board has the advisors I talk to so worked up these days, I feel obligated to make a few observations.
I recently got an e-mail from a reader that warrants further comment. Apparently, he took issue with a small comment in my April column about how advisors can prosper in the current bear market. I’ll let him speak for himself: “I was rather shocked and dismayed to read the leader on the Fast Track column... I'm not sure what you were alluding to with your "Bush Bull Market" comment. Maybe and hopefully it was a satirical spin on the current administration's insane economic and foreign policies that are leading this country into the worst economic crisis this country has seen since the Great Depression.”
Just when it looked like the stock market might be turning the corner, oil prices spiked, throwing airlines and many other sectors into a tailspin again. But as I’ve been saying for the past few months, down markets are the time when successful independent advisory firms hit their highest growth rates, in terms of new clients, and often even assets under management. It sure looks like those “good times” will continue to roll for some time to come.
Of course, all firms don’t grow during such tough times: some actually lose clients, but more often, advisors just don’t add many new ones, while their existing AUM fall with the bear markets, taking firm revenues with them. If your practice falls into one of these categories, in which your new client growth hasn’t accelerated in the past three months or so, it’s now time to ask yourself why, and get your firm on track to capture your share of breakaway clients.
I was recently asked to help create a survey for students at Kansas State University, to determine whether they’d be interested in using a financial planning center. It turns out that they would, with over 75% of the responders reporting that they would be likely to do so. Some of their other answers, however, reinforced my own observations that college graduates, even from financial planning organizations, are woefully ignorant about employee compensation and benefits packages. This hole in their education makes it virtually impossible for them to accurately assess a job offer, causing many young financial planners to turn down jobs that they really should have taken.
As you may know, I’m sympathetic to the challenges facing young professionals in the independent advisory community, in no small part because I’m a young professional, myself (although having just turned 30, I don’t feel quite so young as I used to). As a young consultant to mostly older, successful financial advisors, believe me, I’ve faced more than my share of challenges. Yet I’ve come to realize that we often make things harder for ourselves than they have to be, and that’s at least one problem we can do something about.
In my experience, working with interns has always been a great idea for established advisors. Not only are you giving back by helping to train the next generation of financial planners, but you get much needed help around the office, and a working update on the latest advances in technology and practice management techniques from someone who’s being trained on the leading edge. What’s more and perhaps most important, you also get a preview of a candidate for a permanent advisory position with your firm. From a recruiting and screening standpoint, I can tell you it doesn’t get any better than getting to know someone and observe how they handle various projects and situations over some months right in your own office.
In my January 2008 column for Investment Advisor, I write about the increasing challenges of recruiting young professionals in today’s overly seller’s market. I mention that common courtesy—thank you notes, showing up for interviews on time, canceling or rescheduling appointments well before the appointment date, etc.—seems to be a thing of the past for many job applicants today: and I suggest that advisors can use this rudeness to screen out potential employees.
But I don’t think today’s young advisors realize how much damage they could be doing to their careers by exhibiting this high-handed behavior. I understand that experienced young advisors are riding high these days; job offers are pouring in, salaries are skyrocketing, and you feel as if it just can’t get any better than this.
Well, you’re right: it probably can’t get any better. But it can get worse, maybe a lot worse.
The annual Moss Adams Studies are always revealing, and this year’s recently released Compensation Study was no exception. The pay scale for non-owner professionals is starting to skyrocket, long overdue in my view. According to Moss Adams, compensation for non-owner lead advisors has jumped 41% in the past two years. And I expect we’ll see more of the same in the next several years, at least.
It’s no secret that advisor comp has been driven up recently by increased demand for younger planners: It seems that older owner advisors have realized that they can grow their firms faster with professional leverage—and that good, junior advisors who can eventually take over make their firms much more valuable to prospective buyers.
For some years now, firm owners have been underpaying young professionals, as evidenced by the high turnover rate among NextGen planners, and by the much higher comp that young professionals can command in other professions such as accounting and securities sales. Hopefully, the tide of rising wages will help stop the brain drain of smart young planners leaving the profession.
My last blog about dressing professionally seems to have struck a chord with many young professionals. Not only have I received a flood of e-mails confirming what took me six years to figure out (that dressing the way your clients or boss or audience expects you to dress will make your job and your life much easier), I also got a number of inquiries about other aspects of professional deportment which directly affect the careers of young advisors.
The most frequent question I got involved drinking in business settings, especially around clients and coworkers. Now, I’m no expert on alcohol-related problems, but let’s just say I have a bit of experience in this area, and have certainly witnessed plenty of do's and don’ts over the years. Drinking alcohol is certainly a part of many settings in which you’ll find yourself with clients, colleagues, employees, or bosses.
For the past six years, my mentor has been quite forthright with me about the way I dress in professional settings. The problem he had was how I shopped and, essentially, the labels on my purse, watch, shoes, and suit. He wanted me to look older and more mature by being slightly overdressed to show people that I was not only “smart but prosperous.”
School has started again, bringing frowns to summer-loving children and grins to college football lovers everywhere, including myself. Yes, I’m excited about this fall season, new players, new coaches, new plays, but in the end the only thing that really matters is whether or not they can act together as a team. Even in business, teamwork is one of the most important keys to success. All businesses talk about it, many even have posters framed, matted, and prominently displayed with awe-inspiring quotes about it. You might find yourself endlessly preaching about it through e-mails and meetings, hoping against hope that your requests, demands, and pleadings will somehow turn your office into a well-oiled machine of efficiency.
I have heard some advisors say that some people will never understand or be able to be a team player. Maybe you do feel like teamwork exists in your company culture, but it hasn’t been achieved to its maximum capacity or is present in only a few miniscule situations, most likely not the situations where it is most needed. In all actuality, a business’s growth and success is directly tied to its member’s ability to work together as a team. Instead of finding excuses outside of yourself for why it isn’t working, look inside yourself for the solution.
I am currently suffering through a heat wave at my home in Manhattan, Kansas. But we come to expect and plan for this, as August is nearly always a very hot month in the sticks. However, what is not hot in the month of August is finding good recruits. Believe it or not, recruitment does have very hot and cold seasons, too. If you are looking to recruit talent for your planning firm, it would be helpful for you to know when your chances of finding that talent are higher and plan for it.
Time. No one has enough of it and most all of us want more of it. We all know that time slips away from us, especially in our businesses. You know that list of goals you want to accomplish but keeps gathering dust? Or those systems, services, and operations you have been meaning to implement for the past year? Or, in my case, writing my blog! Let’s face it, we all lose track of time.
If I could completely solve the time conundrum and dish out a block of time for each person who wished they had more, I would. But that’s impossible, so let’s take ourselves back to the basics of business management. The basic key to finding more time is discovering the power of leverage—that is, developing support systems for the most valuable members of your team so they can add even more value.
Support systems in your firm could be technology hardware or software, outsourcing, consultants, administrative workers, or professional talent. By far, the maximum amount of leverage provided to an owner of an advisory firm is his professional talent. But before you jump and go out a hire professional help, there are some things that you need to think about.
A few (what seems to be) ages ago, I started my consulting business by giving career advice to young professionals and career changers entering the planning profession. It was, and still is, one of the most enjoyable things I do.
The questions asked by you have changed over the years. In the past, they were like the following: How do I find a job in the profession? What type of business should I work for—fee-only, brokerage, independent? What should I expect for a starting salary? How do I add value to the firm I am working for? How do I ask for a pay raise?
Today, economics have helped answer those questions. For example, with the current shortage in supply, it’s not as hard to find a job, and most people want to work for independent advisors. We now have lots of research on what constitutes acceptable salary ranges and how to determine your value to the firm. However, there is still little information about being a partner in a firm.
On my last blog, we discussed what to do when employees ask for a raise. There are a lot of reasons why employees will approach you about increases in compensation. So, the question is: How do you retain an employee asking for a raise when you don’t have the resources to do so?
The answer is simple: Tell them the truth about your firm growth.
I get a number of employees who e-mail me seeking advice on the best ways to request a salary increase. I always find this request interesting, because written between the lines is really a bigger issue that all employers should know.
The hidden message? If an employee makes it a point to ask for a salary increase, what they are really saying to you is that they don’t feel valued.
Last week, a financial planner named Bill posted this question on the blog:
As a late starter in the independent business, I find myself needing… …the right person to assist and grow the business, and succession. I am willing to train a newly graduated student but am afraid that I would not be able to challenge him (her) sufficiently so as to retain the new hire. Growth of the business is highly dependent on the right person and I would not want to retain solely on compensation. Any thoughts?
Bill hits on an issue that is the key to the success of any growing advisory practice: retaining professional employees to whom he can hand off firm ownership when he retires.
Bill’s instinct is exactly right: It’s not about the compensation. Rather, it’s about business growth.
Hi, and welcome to The Fast Track, a weekly posting of my thoughts and rantings on issues related to how established advisors can grow their practices, and how the next generation of financial planners can help them do it. We’ll talk about everything from how to position your practice for maximum—yet controlled—growth, to attracting and retaining the right professionals to implement your strategy, to understanding where firm owners are coming from, and how to givr them what they need, even when they don’t ask for it. And anything else that happens to pique my interest—or yours—at the time.
My goal is for the Fast Track to become a place where advisors of all generations can come together, to share their dreams of building the financial planning practices of the future; and the roadblocks and frustrations they meet along the way. I won’t be shy about throwing my two cents in, but I suspect the most valuable postings will come from you—from advisors young and those not so young—who have found workable solutions to the challenges faced by independent practices today: How to build an enduring firm; how to find the right people; how to create an environment where talented young professionals can reach their potential and beyond; how to bridge the communication gap between the planner generations; the right and wrong ways to grow your practice; how to know if you need more staff. That’s just a small start to where we can go.
