Is Your Next-Gen Talent Here to Stay?

With nearly half of the advisor population (43% according to Cerulli) over the age of 55, it raises two critical questions. Who’s going to take care of all your clients when you finally decide to retire? And how are you going to be able to successfully monetize your life’s work? The short and simple answer for the vast majority of advisors is to step up and do a far better job at cultivating and nurturing the next generation. 

I often hear seasoned advisors expressing the sense of entitlement they perceive to be inherent in nextgen advisors. However, often what owners see as unrealistic expectations are merely a desire for a clear, well-defined career path.

In my experience, next-gen advisors don’t expect the keys to a corner office tomorrow, but they DO want to know precisely what is expected of them to eventually get there. It’s incumbent upon you to articulate the skill sets that younger advisors will need to develop and milestones they’ll need to reach in order to progress into a more senior role.

NextGen Financial advisors can not only help offload some of the work from team leaders, freeing you up to focus more time on building relationships, they can infuse incredible energy into a lethargic practice and open new avenues for growth. These younger advisors are your natural entry point to begin establishing relationships with emerging wealth Gen X and millennial clients, and those are the very relationships that will enhance their overall job satisfaction and improve the likelihood of them staying with your firm for the long haul. To facilitate this connection, a growing number of more progressive practices have begun exploring new ways of restructuring their fee schedules to include hourly or flat fees for planning services, as well as providing more flexibility around asset minimums to take on high income accumulators who agree to meet baseline asset thresholds over time.

If you haven’t yet, you may also want to become both personally and organizationally more engaged with your community and philanthropically active. There’s no question that younger advisors (especially millennials) tend to be exceedingly socially conscious and charitably inclined. Many are drawn to the profession precisely because of the direct ability it provides to make a difference and improve people’s lives. Engendering a positive feeling that your firm values are not solely driven by profit but also by a desire to give back will go a long way towards fostering greater loyalty.

Perhaps most importantly, however, firm leaders need to devise a clear path to equity ownership for second and third generation advisors if they genuinely want to build a sustainable practice that will endure for generations to come. Given sufficient time, it’s also often the most financially lucrative succession strategy for advisor owners. An equity participation plan for select participants can be structured to transfer ownership as gradually as you desire. And in order to also help retain strong performers who may not fit the profile of a future owner, it can be paired with a phantom equity program that incents those individual with shares of profit distribution based on the achievement of set firm goals without actually having to relinquish an ownership stake to them.

Keep in mind that your best NextGen advisors – the select individuals you hope to entrust your firm to one day – are very likely the same individuals who are at or near the top of other advisors’ recruitment candidate “wish list.” If you don’t value them enough to nurture them and incent their loyalty, it’s a good bet that somebody else will.

Coaching Questions from this article:

1. What practice management and team development steps can you take to begin cultivating NextGen advisors to become future leaders of your business?

2. Think about your firm’s current NextGen advisors. Are their career paths clearly defined with specific goals or are they somewhat vague? What steps can you take to provide greater clarity?

3. If an internal succession may be a viable path, what steps have you taken to formalize that process? What role might equity incentives play in helping to “lock-in” future leaders of your practice?