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Map to the Next Generation of Financial Planners

Financial planning is a desirable career. But the next generation might not know it yet.

“It’s a desirable position for people coming out of college because it commands a high wage,” said Kyle Kensing, online content editor at the jobs site CareerCast.com in a CNBC article.

In the May 2019 Financial Planning article, “Daunting but Doable: How to Get Students to Consider a Planning Career,” Bob Veres offered planners and educators ideas for how to let the next generation of planners in on the secret.

Connect with local high school guidance counselors. Guidance counselors are oftentimes where students get ideas as to what they want to do with the rest of their lives. “They wield lots of influence over graduating seniors’ area of study selection, and right now, most of them are not clear on what financial planning is,” Caleb Brown, CFP®, told Veres and Financial Planning.

Perhaps your local FPA chapter can connect with guidance counselors and make them aware of the profession, point them to schools with CFP Board registered programs, and then identify the benefits of a career in financial planning.

Connect with alumni associations. Offer to speak to business students at your alma mater about financial planning. With your alumni association, you can also work toward helping to establish a financial planning program, Veres reported.

Offer scholarships or internships. It’s a tough world out there for recruiting talented individuals. Many professions are competing for the same brilliant minds, but you can be first on their list of where to work by offering students scholarships to take the CFP® examination or to pay for books.

Also, post internships and have students work in your firm for a summer. Multiple publications and financial planning podcasts note the importance of mentoring to retain next-generation and diverse talent in the profession.

Which leads us to the last tip:

Mentor new planners or seek a mentor if you are the new planner. It’s difficult to find time in your busy schedules, but helping the next generation navigate the profession could help retain talent coming in.

And if you are the new talent, finding a mentor is key. But do your research. When you reach out to somebody to pick their brain or ask them to meet to discuss something, do your homework: listen to podcasts they’ve been interviewed on or read articles they’ve written or been quoted in, said Rianka Dorsainvil, CFP®, in a recent episode of the 2050 TrailBlazers podcast.

Also, respect their time. If you schedule a meeting with them and need to cancel, give them at least a day’s notice. If you have been a product of an influential mentorship, pay it forward. Mentor other people coming up in the same way you were mentored.

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Ana Trujillo Limón is senior editor of the Journal of Financial Planning and the FPA Next Generation Planner. She also edits the FPA Practice Management Blog. Email her at alimon@onefpa.org, or connect with her on LinkedIn


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What to Do When You Don’t Know What to Do

There is a topic that has come up in so many conversations I’ve had this past week, it was like the universe was screaming at me to please help some folks with this issue.

So here it goes: How do you decide what to do?

Making decisions can be difficult and professionals today are inundated with so many options that it only adds to the pressure.

  • What should you specialize in?
  • Should you choose a niche or be a generalist?
  • What organizations should you join?
  • Should you join an organization at all or just go it alone?
  • Where should you spend your marketing efforts?
  • Where should you spend your marketing dollars?
  • Who should you hire to help you with technology?
  • What should you do next to grow your business?
  • Should you hire someone?
  • What should you hire someone to do?
  • Who should you refer business to?
  • Who should you ask for referrals from?
  • Should you work from home?
  • When is the right time to move to an office if you are working from home?

I could go on and on, but you get the idea and you’re probably having serious stress flashbacks by now.

The ability to quickly make a decision—and then act on that decision—is a key ingredient to success.

Staying stuck not knowing which direction to go just leaves you, well, stuck! As in nothing is happening.

Not making a decision keeps you in reaction mode instead of “conquering” mode! While some folks can’t make a decision that will get them off the starting block, others have a different issue—they constantly make new decisions.

The problem with too many entrepreneurs, or folks who are responsible in any way for their own paycheck, is they jump from thing to thing to thing and never really give anything a chance to work.

Just like with so many of our half-hearted attempts at weight loss—if the approach doesn’t work instantly to solve all of our problems, we quickly abandon it for the next shiny promise of success.

Looking for some concrete advice on how to make decisions? Here’s my framework for the top three issues that come up in my conversations.

Challenge: Analysis Paralysis

Solution: Set a timer. Seriously. Set a timer or a deadline, do whatever research you feel you need to do and Make. A. Decision. This is a skill you absolutely need to develop if you want to be successful and being stuck in “un-decision” mode is just fear stopping you from moving forward.

One of the best pieces of advice I ever received around decision-making was from six-time New York Times bestselling author and one of my personal mentors, Larry Winget. I’ve heard him say this repeatedly: “Make a decision. And make it right.”

Stop dwelling over every little detail of what will or won’t work—make a decision—and then commit to doing what you need to do to make sure it works!

Challenge: Too Many Options for Limited Resources

Solution: I talk to a lot of people about this. Where should you spend your marketing dollars? There’s social media, companies that sell leads, BNI and networking groups, funnels. You name it; it’s out there.

Some people will throw coaching in this category as well, but be clear, that is a completely different situation. Coaching is an investment in learning how to be successful. The rest of these are marketing strategies. This is a very important distinction.

In terms of which marketing strategy you should get behind, think first about what you’re already naturally good at doing. Like I mentioned before, they all work if you stick with them. And if you’re already a bit of a natural in one area, you’re going to have a greater chance at success learning how to dial it in strategically in order to grow your business.

Already spend half your day on Facebook? Then go with social media. Are you a natural go-getter sales person? Then investing in leads could make perfect sense.

What doesn’t work is picking a strategy that you already have negative feelings about but doing it because it’s the marketing flavor of the month. I do a lot of work with my clients around getting over their fears and taking action. But if you have limited resources and can only invest in one or two marketing strategies, give yourself the best chance at success!

And stop switching strategies at first sign of conflict. It’s not failure, it’s feedback!

Take the feedback you get from your efforts and tweak what you’re doing. Don’t abandon the ship prematurely.

Challenge: When to Hire Team Members

Solution: This one is actually a simple math problem: if you are doing $20-an-hour work that keeps you from doing $100-an-hour work, then you need to hire someone.

When you first start out you have time on your hands. You can afford to bootstrap your efforts and do all sorts of work yourself because you don’t yet have clients to serve.

As you get going, your two main focuses must be growing your business (getting new clients) and serving your current clients.

How fast your business grows is in direct relation to how much time you can spend on getting new clients—which means how fast you can hire people to do all the things that are not necessary for you to be doing.

A final word of warning—and hopefully some wisdom. There is one mistake I see people make more than anything else: treating every little decision as if it is the end all, be all, biggest and ONLY decision you’ll ever get to make. There are absolutely zero things I can think of in my history as a professional or business owner that I didn’t get to adjust or tweak if it wasn’t working out.

Have I tried marketing strategies that didn’t work? Absolutely.

Have I hired coaches that ended up not being a good fit for me? Yep.

Have I hired team members that didn’t live up to my expectations? You bet.

All of these things are fixable! Every single one of them.

So get out there. Make some decisions. Even better—make some mistakes and then fix them! You’ll be all the more successful for it.

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Erin Marcus is a nationally renowned speaker, author and consultant who has been creating business success for more than 20 years. Her combination of a street-smart upbringing, formal education and real world business experience provides a unique point-of-view and ability to relate to her audiences and clients. For more information on Marcus, check out her website at: www.ConquerYourBusiness.com.


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Three Ways to Address the Lack of Adviser Diversity

The financial advice profession is objectively one of the least diverse professions in the United States. Many of us in the advice industry are painfully aware of this from an anecdotal perspective; one only needs to attend almost any industry function and simply scan the room for it to be clear.

The actual statistics are even more sobering. Of the more than 83,000 CFP® professionals in the U.S., less than 3.5 percent are black or Latino. Women enjoy somewhat better representation, at 23 percent. However, once you look at all advisers, not just CFP® professionals,  women only make up 16 percent of the total, and the black and Latino representation among all advisers is almost infinitesimal.

The reality is that advisers are a fairly homogenous bunch. With some exceptions, the average adviser is a 50-year-old white male, who likely began his career as a broker or insurance salesperson. In fact, the largest cohort of advisers is between the ages of 45-54. According to U.S. Census Bureau data, however, the average American is a woman, with a median age of 37, who makes around $47,000 annually. She also happens to live in a city (and leans Democratic, for what that’s worth).

Meanwhile, America, already a diverse nation, is becoming even more diverse. The Census Bureau projects that the U.S. will become a minority majority nation by 2043. Non-Hispanic whites will still be the largest single group, but no one group of people will have the majority. The implications of this should serve as a wake-up call to our profession. We need to be prepared to better serve the retirement planning needs of a much broader swath of Americans in the future. And it’s important to note that retirement planning needs have changed significantly, as most Americans no longer have pension plans to sustain them in retirement, and the median income is $60,000.

As such, these Americans are mostly unprepared for retirement, unfamiliar with investing and underserved from an advisory point of view. The Center for Retirement Research calculates a measure of retirement readiness, the National Retirement Risk Index (NRRI), which reports that 50 percent of Americans are at risk of declining living standards in retirement. These are people who desperately need to save for retirement, and currently have little in retirement savings. The majority of Americans need behavioral coaching around saving, financial planning and even basic personal finance assistance. There is most definitely a market for this type of advice; however, the reality is that this type of advice will not be anywhere near as lucrative as the high-net-worth individuals many advisers pursue today.

Coincident with the above is the fact that there happens to be fairly significant demographic changes taking place within the wealth management space. Almost 40 percent of advisers are expected to retire in the next 10 years, according to Cerulli Associates. Combined with the fact that over the next 20 years we will experience “the great wealth transfer”—the migration of assets from baby boomers to their heirs (most of whom do not currently have advisers) by 2022—the U.S. wealth management industry is likely to face a shortfall of at least 200,000 advisers.

The advisory practice of tomorrow is going to be very different than that of today. And the systemic changes described above just might help position the industry for the changes that I believe are necessary, including:

  1. Advisers becoming much less sales- and investing-oriented, and instead looking and feeling more like financial counselors, deploying soft skills such as emotional intelligence, empathy and compassion.
  2. Practices pivoting away from being profit-oriented toward being client-oriented.
  3. The profession embracing diversity and inclusion among advisers.

The question is how, and what are the practical steps we need to take in the meantime, as an industry, to ensure a more diverse adviser population positioned to serve an increasingly diverse population?

Recruit and Hire Purposefully

Too often, we hire from a rather closed network of friends and family, or even friends of friends and family, which directly contributes to the homogeneous culture we have today. Instead, we must make a conscious, purposeful decision to hire diverse candidates, and this commitment must come from the top and permeate the organization. Recruiting from historically black universities and colleges is a great start. Targeting appropriate affinity groups, professional networks and community associations is another way to identify diverse candidates.

Closely tied to a firm’s recruiting efforts is the overall messaging of the firm, which also needs to be consistent with a commitment to diversity and inclusion. Candidates will naturally review advisory firm websites, social media and communications before deciding to accept an offer, so firms need to ensure all internal and external communications and images align with the core commitment to diversity and inclusion.

Education is important, as well. Oftentimes, college and high school students simply do not realize that financial planning is a career option, or if they do, they view it as a hard-charging, Wall Street-type of role. It is critical for high schools and universities to offer classes in financial planning and/or financial literacy, and for industry leaders to do their part in enabling success for the next generation with programs such as the Envestnet Institute on Campus.

Rethink the Advisory Business Model

Technology must be incorporated in all areas of advisers’ practices in order to address the changing industry. From client acquisition and onboarding to aggregation to online meetings and scheduling, even elements of investment management. These practices will need to be automated in order for advisers to scale their practices and take on additional (perhaps lower margin) business. Independent RIAs with advanced technology integration generate around 50 percent more financial plans and investment proposals compared to their peers that don’t benefit from advanced integration. According to Envestnet-sponsored research from the Aite Group, this increased advice activity translates into a greater number of clients served by the practices (57 percent more), larger books of business (78 percent larger) and greater practice revenue/production (46 percent greater).

As many elements of the traditional advisory business model become commoditized, such as trading, asset allocation and even security selection, advisers must concentrate their efforts on higher-value—and more impactful—activities. They must do more with less and segment their clients appropriately. They must move away from providing advice on investments, and toward advice on life events, long-term goal planning, financial planning and relationship management. Everything else that is or has become commoditized must be automated.

For the more diverse adviser of tomorrow, this means supporting the industry’s move toward holistic financial wellness—an approach that incorporates all aspects of wealth management with less of a focus on pure investment management. Rather than relying on a data-driven approach to the handling of money, an increasingly diverse population of clients prefer a deeper focus on life goals for themselves and their families. This shift will attract advisers who care more about making financial wellness a reality and who respect the differences in communication styles when it comes to helping clients reach their goals.

Modify Compensation Approach

The way advisory firms are structured today from a compensation standpoint provides a self-selecting mechanism for hiring talent, which also contributes to the current lack of diversity. On the matter of hiring and onboarding practices, there is an emphasis on bringing in candidates who already have a strong network of potential clients. In fact, a vast majority of hiring professionals (86 percent) are looking for prospects who can bring in clients right away, according to CFP Board research.

This has a twofold effect of bringing into the firm primarily sales-focused individuals, and discouraging candidates who do not have friends and family with substantial-enough savings. Instead, firms can institute a team-based salary and bonus framework that would incentivize service, client retention and bringing in any new business, not just large books of business.

With a compensation strategy that includes a team-based incentive, firms reward everyone involved in the client relationship, with a scaled reward structure based on the level of personal contribution. That way, the need for financial security for all team members is addressed, and the team is motivated to work together and deliver strong results.

Conclusion

There are both aspirational and practical reasons to champion diversity. We should want every industry, including wealth management, to be diverse, because it’s simply the right thing to do. But also, countless studies have shown that diversity—of culture, gender, race, background, thought and more—objectively leads to better outcomes across the board. In order to ensure our industry thrives amid all the changes ahead, we must all do our part to enable and create a diverse, vibrant workforce.

Estee Jimerson

Estee Jimerson is the managing director, head of asset manager distribution at Envestnet.