You can’t be a successful mentor if no one wants to be mentored by you. Increasingly, advisers are finding themselves in this situation. Getting young advisers to join the industry, much less your firm, is challenging. If the predictions are true, things could get worse before they start improving.
According to Cerulli Associates, the financial planning industry will shrink by an expected 25,000 people in the next five years. That’s on top of the contraction that has already occurred over the past five. Despite public relations promotions of the attractiveness of the financial planning profession, there aren’t many college graduates who are chomping at the bit to become financial advisers. Young people have other options—and many of those options pay better, at least in the short term. While one might argue that our profession is a more lucrative option in the longer term, that may not be a compelling argument to those entering the workforce. They are at a stage in life when they are experiencing many firsts, including the financial obligation of repaying college debt and responsibilities that go along with a new spouse, a new home, and maybe a new baby, too. Think back. You remember how it was.
What does this mean for financial advisers looking for young advisers to join their firms?
To attract and retain talent, you may need to offer a more competitive—and predictable—compensation structure. We often make the mistake of judging Gen X and Y candidates in terms of the experience we had when starting our careers. But the world has changed. Do you think it is even possible for the next generation to simply hang out a shingle and start their own shop? The days of the cottage industry are long gone.
Occasionally, advisers try to attract new talent without taking on financial risk to the firm. After all, that’s how many boomer advisers got started. You can’t count on that approach working today, though. Part of the challenge is demographics. There are far more boomers than there are Gen Xers, though one could predict that the numbers will normalize by the time Gen Y comes of age in full force. In the meantime, it seems as if firms will need to pay more for the next generation to embrace a career in our industry. And if that’s the case, it’s best to treat the addition of a junior adviser to your firm as a critical investment—one that needs to be mentored for a period of three to five years before you can realize the longer-term return on your investment.
Managing Principal of Practice Management
Commonwealth Financial Network