A new report cites estimates that there will be a gap of 10,000 advisors by 2020, and offers suggestions on how to close that gap.
In what it described as a “first-of-its-kind” study, Fidelity spoke at length with more than 30 successful young advisors to understand their career journeys and the ways their firms contribute to their development.
Those discussions revealed three important phases in the development of advisor talent, and identified specific steps that firms can take to help advisors successfully navigate their careers and have a lasting impact on their businesses.
The study noted that only an estimated one in five new trainees move on to become productive advisors, citing data from Cerulli Advisor Metrics 2015 – Fidelity Executive Forum Pulse Poll 2015. Moreover, the report notes that advisors who move to a new firm report higher job satisfaction (67% versus 8% at their prior firms), a better financial situation (80%) and more passion and enthusiasm for their work.
The report notes that advisors continue to switch firms — largely to the benefit of the independent channels. According to J.D. Power’s 2015 U.S. Financial Advisor Satisfaction Study, former colleagues are the more important influencers for advisors that switch firms. And that, according to the Fidelity report, suggests that one departure could lead to more.
The report identifies three steps that firms can take to support advisors on their journey to the top:
1. Stabilize: Help Young Advisors Get Established
Fidelity notes that helping clients achieve their financial goals was a key driver of job satisfaction for many advisors interviewed. This was something that those advisors felt deepened client relationships and differentiated them from digital advisors. Training in financial planning gave them the right tools to have comprehensive conversations about client goals, and establishing a client niche or pinpointing the right target clients led to greater job satisfaction for many. Additionally, rotations in different roles (e.g., research, investments, planning, sales) or working with different staff at the firm helped younger advisors identify their strengths and areas of specialization.
The report explained that many advisors shared the difficulty of being a new advisor and being responsible for bringing in new clients, and suggested that offering a safety net through salaried positions or a starter book of business would have reduced some of the stress and uncertainty during this period. Additionally, it said that helping young, successful advisors establish fruitful prospecting channels enabled them to build and sustain a book of business.
2. Evaluate: Identify High Performers
Fidelity’s research revealed three profiles based on the young, successful advisors they spoke with, demonstrating the different paths and approaches advisors can take to excel. They categorized them as Compassionate Problem-Solver, Builder and Competitor.
Among Compassionate Problem-Solvers, financial planning and developing solutions is highly motivating. They enjoy working with clients but aren’t sales-oriented; they’re friendly, but not necessarily extroverted, and math-oriented. The analysis says they are willing to teach and educate clients, and their greatest satisfaction comes from helping clients achieve goals and overcome challenges.
As for the Builders, the report says they are extroverted, enjoy meeting with people in all situations and like financial planning, but also very much enjoy prospecting and building new business. The report says they are “goal-oriented and driven,” confident in their ability to build relationships with people, and entrepreneurial. The report notes that regional and wire house channels are appealing to these advisors because they enable advisors to set up and build their own businesses with support.
The report says the Competitors view the stock market as exciting and thrilling, and are focused on success and improving production numbers. They enjoy the thrill of the hunt, love to follow the markets and pick winners, and are less focused on financial planning. For this group, the report says the wire house channel is appealing.
3. Prepare and Enable Top Talent to Excel
Finally, the report makes the following recommendations in retaining and developing these young advisors:
- Have candid discussions about: whether ownership opportunities are even attainable at your firm, the criteria for being eligible, and what is required of the advisor to gain equity/ownership.
- Become knowledgeable about equity and ownership opportunities at competitive firms and across the financial services industry to ensure you have a competitive offering for the right advisors.
- Provide opportunities to take over the practice of a retiring advisor.
- Invest in marketing and business development to further their success.
- Tap into the transfer of wealth to the next generation by assigning young, successful advisors to help the children and heirs of your current clients.
- Provide some flexibility for individual advisors to serve these clients (for example, allowing a certain percentage of their book to be comprised of these clients).
- Create business models, processes or fee structures that make serving younger or mass affluent clients economically feasible.
- Invest in technology to attract and retain younger clients.
