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Retirement Planning Lessons for Emerging Advisers

The leading edge of the baby boomer generation turned 65 back in 2011. Since then, we’ve watched a large percentage of the adviser population move closer to that traditional retirement age. But the transition to retirement has been anything but traditional, as many boomer advisers have chosen to remain ensconced at their firms. It has created an interesting dilemma for emerging advisers waiting to move into more prominent roles. Should we worry about history repeating itself when these emerging advisers age? If so, what lessons can the younger generation learn from watching boomer advisers (not) retire?

Setting the Stage

First, it helps to understand the reasons boomer advisers are increasingly choosing to stay in the business.

It’s not your grandmother’s retirement anymore. The Bureau of Labor Statistics predicts that the percentage of 65- to 74-year-olds actively looking for work will increase faster than any other age group through 2026. When you think about it, it’s not particularly surprising. After all, we’re living much longer than was thought possible when the retirement age was conceived back in the 1930s. In fact, the notion of retirement is outdated—it’s becoming much more of a life pivot.

Retiring successfully isn’t just about money. Health and wellness, family relations, leisure and social activities, and personal growth and development are all important. And everyone copes with the question of what’s next differently. The thought of leaving something behind if there isn’t something more profound to move forward to can be paralyzing.

Boomers come from an era that embraced “living to work” as opposed to “working to live.” Work has been the centerpiece of life. Professional achievement and financial compensation have prominent spots on the self-worth scorecard. Advisers have poured their heart and soul into building a business and serving their clients, making many sacrifices along the way. Plus, these advisers have seen and heard firsthand the difference their advice has made on the quality of others’ lives. Who wouldn’t want more of that?

It’s their identity. When boomer advisers were young, they juggled the responsibilities of creating a family and growing a business simultaneously. Then they reached the point where something had to give. Often, it was the passions of an earlier life—hobbies, sports, socializing with friends. After the kids left home, satisfaction was derived from the work itself, rather than from rediscovering those lost passions.

Founderitis is real. Whether consciously or not, a failure to delegate keeps founding advisers in a power position. Rather than developing the next generation of leaders, they hold tightly to responsibility. But none of us can go on indefinitely, which means the business tends to pay the price.

The Lessons in the Data

Nature, nurture and circumstance have all played into the industry landscape we see today. It’s not that it’s a bad thing necessarily, but it has created challenges both for boomer advisers struggling with how to pivot to the next stage and for emerging advisers who are more than ready to take the reins. It also offers some lessons that emerging advisers may want to take to heart as they develop a vision for what they want their life and career to be.

  1. Broaden your horizons. Be careful that work does not become the one and only focus of life. Spend time with your family, nurture your passions and hobbies and try to ensure that fun is an ingredient in everything you do.
  2. Be careful about scorecards. The industry lists many advisers aspire to be named to include quantitative criteria like AUM and wealth of clients served, not qualitative data like family dynamics, life enjoyment or how you give back to society.
  3. Expect to pivot. Emerging advisers have seen firsthand how some boomer advisers are struggling with retirement. This industry is changing fast. A long-term career will undoubtedly include even more pivots than your older colleagues have experienced.
  4. Hire people who are smarter than you and delegate to them if you want a business that will outlast you. That means reinventing yourself to add new leadership value.
  5. Check your attitude and behaviors. Be open to new opportunities.

What does this really say? Build a life—not just a career—and then work hard to protect it!

Joni Youngwirth_2014 for web

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network in Waltham, Mass.


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Reinvention: Why It’s Required to Drive Lasting Success

Do you want your business to outlast you? Some advisers set this goal when they design a firm. For others, the focus comes as they anticipate transitioning their business to a new generation of ownership when they approach the end of their career.

There are no universals when it comes to timing for the business life cycle. The life cycle is the pace at which a practice evolves from inception to growth, maturity and eventually a final stage of decline. If there is no intervention to reinvent the firm, the natural life cycle of the business will rule. The length of each phase is unpredictable. For example, growth can come in a year or develop over many years. But is there a universal requirement for creating success that will endure? Yes. It’s the willingness to reinvent your business.

What Does Reinvention Require?

Reinvention requires a magnitude of change that ushers in an entirely new approach to doing business. For example, the introduction of the robo-adviser created a radically different way to work with clients. No matter what you think of this technology, it was radical enough to disrupt the industry. Since “robo-advice” was introduced, it has been continually improved. Today, the digital approach has morphed to add human service components. In turn, advice given by human advisers has shifted to include digital components. Another client-centric reinvention is the growing interest in responsible investing, as advisers respond to client demand by integrating environmental, social and governance factors into investment decision-making. These are only two examples of reinvention, but they demonstrate its essence: major transformation in response to market forces and industry changes.

Beyond Continual Improvement

Reinvention differs from the concept of continual improvement. Many advisers rightfully believe their business is improving all the time. Improvements may include streamlining the way data is collected from clients, implementing enhancements to customer relationship management, adopting new technology, updating forms for greater efficiency and enhancing internal communication. Although continual improvement is needed to run a solid business, it’s not as radical as reinvention.

Timing Is Everything

Every business is different, but one thing is clear: reinvention is essential long before a practice reaches the decline stage. If one waits that long, it will be too late to save the business. The faster the pace of industry change, the greater the need for reinvention. As such, an adviser needs to be prepared to reinvent his or her practice. In fact, it is likely that radical change will need to happen multiple times to keep a firm in the growth stage. The greatest danger is waiting too long to begin the reinvention process. Maturity can be a long or short phase. This means that strategic shifts should be part of every firm’s business planning process.

Is Age a Factor?

It isn’t a factor for everyone, of course. But as advisers age, some understandably do not embrace change with the same enthusiasm of their younger years. Many advisers keep all their energy focused on their next client meeting. Why stir the pot with worries of reinvention when business is good or when an adviser is moving to a lifestyle practice? Most advisers love meeting with their clients. The responsibilities of being the CEO and running a business pale in comparison. But if advisers lose passion for leading their business, it’s not likely that they will be leading the reinvention process. To guard against unforeseen problems, advisers entering the home stretch of their careers need to incorporate additional focus on strategic direction as part of the business planning process.

Nurturing the Life Cycle of Your Business

Some advisers might think that reinvention—a change of magnitude—is not possible due to the constraints of industry providers and government regulations. I believe that, despite these limitations, every adviser is empowered to adapt to change and adopt new tools, technology and practice models at every stage of a career and the life cycle of a business. The key is to embrace reinvention to keep the firm in the growth stage.

Joni Youngwirth_2014 for web

Joni Youngwirth is managing principal of practice management at Commonwealth Financial Network in Waltham, Mass.


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How to Recruit a Gen-X Successor on Your Own

Choosing a successor isn’t the easiest decision. Advisers commonly choose to partner with an RIA rollup or aggregator firm setting them up with a built-in succession plan. Nobody can argue with the convenience, but I’m not convinced this is the best option 100 percent of the time. If you’re looking to find a talented Gen-X successor to take over your business, there are plenty of solid candidates out there and it may give you more freedom and control than an institutional partner. Here’s what to keep in mind if you’re going this way.

Y Does Not Equal X

The financial planning profession and financial services industry is enamored by the “next gen.” While this term is intended to mean anyone younger than the baby boomers, all nex-genners are not equal. Although thought leadership is abuzz with talk of the millennial invasion, I think the best opportunity to find a great successor lies within Generation X.

Generation X is roughly defined as the cohort of people born between the early 1960s and the early 1980s which puts then at about approximately 39 to 59 years of age. According to the Bureau of Labor Statistics, there’s nearly as many Gen-Xers and Gen-Yers in the workforce—the difference isn’t that substantial—and according to Cerulli Associates, Gen X is going to be handed down $68 trillion in wealth over the next two decades or so. I would look for a Gen X-successor, someone who can relate to this population because he or she is a member of it.

Just look at where Gen X is now compared to Generation Y. They’re qualified investors now, have less of a debt abyss to navigate themselves out of, and are ripe for financial advice given that they’re at a more mature stage in their lives.

Yes, we all know that according to the numbers the wealth transfer to millennials is going to be the largest in humankind or however the saying goes. Sounds great! However, we aren’t there yet. At this point it’s all theoretical and the Gen-Xers are the ones upgrading their houses.

What to Look For

How do you know a candidate for a successor is a good one? Look at the adviser’s ability to develop new sales completely from scratch instead of through word-of-mouth or referral. While many advisers will boast that they love business development, the reality is that a small percentage of them actively develop leads. If your ability to retire happily with money to spend on the grandkids depends on another person’s ability to drum up sales, you’d better make sure they have the ability to snag a deal from thin air while the market is crashing down. Elsa, Anna, Olaf and all the rest of the Disney paraphernalia can get quite pricey after all.

Sales ability is the most important thing you can look for in a candidate. All other skills (practice management, technical competency, analytical prowess, to name a few) can be learned or bought. Successors who can sell, no matter what price tag they come with, are inexpensive; successors who can’t sell are one of the most expensive investments you can make in your business.

Questions to ask include:

  • What sales training programs have you completed?
  • How often do you engage in sales training?
  • Pretend I’m a prospect you’re cold-calling and pitch me a seat in your retirement seminar.
  • How many leads a year do you receive from COIs and how do you go about developing those relationships for mutual benefit of both parties?
  • If you had to find 10 new clients in a month from today, where would they come from (if you couldn’t get referrals from your existing base or people you know)?
  • How are you using technology to prospect, pitch and close a sale?

Finding the Successor

Now that we’ve established that you want a lean, mean, Gen-X money-making machine, how do you go about finding one?

Take advantage of your vendor relationships. Here’s where your vendor relationships come into play. Why? If the vendor is selling to you, they’re probably selling to other advisers. And if those other advisers are doing well enough to pay the same bill you pay, they must be doing something right. Call up the sales rep who sold you the product and have a talk. I’ll give you some names of firms who do a lot of business with our industry: Miller Canfield, Deckert, Black Diamond, Vestmark, Riskalyze, Orion and eMoney Adviser, among others.

Target industry organizations that you may be a part of or be able to access as an outsider. For example, the CFA Institute has a member directory and several LinkedIn groups for its local societies and member committees. These groups have tens if not hundreds of thousands of members on LinkedIn. In some cases, you don’t actually need to have the designation to become a member of the LinkedIn Group. For example, I am a member of the Certified Financial Planner (CFP) group on LinkedIn although I do not hold the designation. You never know whom you can meet online—start posting up!

Tap into the power of the network. Some events by the CFA Institute are for members only while others are open to the public. I’ve used these directories several times when I needed to find the right person for a business need I had and met with great success. Crack them open and start talking. If you are a member of CFA Institute or the Financial Planning Association, utilize your time at organization events to make connections with potential successors.

Try communicating with media influencers (or their staff and affiliates). You just never know who brilliant minds are connected with and what they’ll come up with if you ask. Have you ever been interviewed by a reporter? Do you know the editors of any financial magazines or can you get introductions to any? These people tend to know what’s up and know a ton of folks in the business. It’s always good to be in touch with the media anyways, right? I’ve met several powerful people this way.

Getting the Deal Done

On the flip side, what can you do to increase your attractiveness to a successor? Ask yourself if your brand is really friendly to people from the next generation. They tend to favor a less formal dress code and opt for higher work life balance. Are you offering Kashi and granola bars in your kitchen or is it more your style to swing by Dunkin’ Donuts to pick up a stash to share with the office breakfast meeting? Get acquainted with Whole Foods.

And while you’re at it, a healthy diet of social media can’t hurt. A strong digital presence, including a Gen X and Y friendly website, will work in your favor. When was the last time you posted a selfie to LinkedIn? Bring on the blogs and instant messaging.

Think about your office décor as well. Consider some comfy bean bag chairs and a treadmill nook instead of a stuffy mahogany-clad conference room. How Google of you!

This is probably the biggest transaction of your life; but it’s not going to be insignificant for your successor either. So whip out the MoneyGuidePro and create a financial plan for the successor’s next 30 years. Not only will this clear up any fuzzy expectations, it will also reduce uncertainty in his or her mind. Just like all you advisers say on your websites, a financial plan is the key to happiness and peace of mind.

Or however that cliché goes…

Sara Grillo

Sara Grillo, CFA, is a top financial writer with a focus on marketing and branding for investment management, financial planning, and RIA firms. Prior to launching her own firm, she was a financial adviser and worked at Lehman Brothers. Grillo graduated from Harvard University with a degree in English literature and has an MBA from NYU Stern in quantitative finance. See her website at www.saragrillo.com.