Executive Summary
One of the most common challenges that advisory firm owners face is the fear that paraplanners or associate advisors they hire will just stay with the firm long enough to get trained, and then leave to start their own practices. And the reality is that such "Hire, Train, and Leave" scenarios do occur from time to time. Yet the reality is that all too often, this fear actually becomes a self-fulfilling prophecy; after all, if you limit your investment of time, effort, and training into your new advisor and don't give them opportunities for advancement out of fear that they'll leave, it virtually ensures that they will!
In today's guest blog post, Alan Moore - a "young" Gen Y advisor himself and co-founder of the XY Planning Network that helps young planners develop viable businesses working with their young peers - lays out some of the most common reasons that today's paraplanners and associate advisors are breaking away from the firms they started with to launch their own instead. And as Alan reveals, the common reasons articulated for why advisors leave really are often driven by firm owners who, in the process of fearing that their advisors might leave, may actually be accelerating the outcome they're trying to avoid!
Fortunately, the reality is that many of these challenges are avoidable; by investing in young advisors and giving them opportunities to grow and advance and serve the clients they wish to serve, they will have little reason to leave and instead can become productive and successful members of the advisory team. In fact, for many firms struggling to figure out how to bring down the average age of their clientele, working with young advisors - who often wish to work with their own young peers - creates win-win opportunities for both the advisor and the advisory firm, though executing effectively will require many advisory firms to open up to the reality that the business model that has worked best for serving retiring baby boomers may not be the right business model for serving the young clients of the future!
I recently moderated a panel session on serving next generation clients at the NAPFA National conference in Salt Lake City. A major theme among the panelists was that firm owners needed to let their younger advisors work with their peers using one of the proposed service models. One advisor in the audience asked the panel “what if I don’t want to let them do this?” and the quick response from the panelists was “then your young advisor has probably already called one of us.”
Since starting my firm in 2012, I have talked to literally hundreds of associate or "junior" planners and paraplanners who are unhappy in their current position. I have had over 50 conversations since launching the XY Planning Network in April of this year alone. Sometimes I feel like I’m in The Twilight Zone as the complaints from these advisors are very similar. Here is a breakdown of the common things I hear from these young advisors on a regular basis (so you have the opportunity to salvage the relationship you have with them while you still can!).
No career path beyond paraplanner
Most firms still don’t have a general outline of a career path, much less a well-defined one. Your associate advisors need to know what it takes for them to move from back-office to client-facing, from 2nd chair to lead advisor. What skills do they need to learn? How can they obtain those skills? You need to figure out what will make you comfortable allowing them to move up the career ladder, and articulate it clearly (and often) to your staff.
Bonus tip: Asking your associate advisor to create their own career path is just absurd – they have no idea what your personal expectations are. If you can’t create a career path for them, you can’t expect them to create one you will be happy with. Can we just agree to not have this be common practice anymore?
(Michael's comment: While it's valuable to have your young team members articulate what they're trying to work towards in their career, Alan has a crucial point that if you don't have some vision for where your practice is going, there's no way for the young advisor to know whether they fit into that long-term picture or not!)
They’re not getting client facing experience
Advisors of all ages want to work directly with clients. It can be as simple as making phone calls and returning e-mails, all the way up to having them in the client meetings talking with clients. Train your advisors on how you want them to interact with clients, then let them actually do so. On my first day as an intern, my mentor had me explain Roth conversions to a client with several million in assets. I always felt like he gave me enough rope to hang myself in a meeting, but was there to cut me down. Do you think your associate planner feels that way, or are they wishing you would trust them enough to just let them contribute?
Bonus tip: Having an associate advisor in the meeting, but not allowing them to interact with the client, can be worse than not having them in the meeting at all. It’s not fun to feel like a fly on the wall when what you really want to be doing is helping your clients.
(Michael's comment: While having an associate planner "just" listen and observe is fine for a limited period of time as they learn, ultimately it's crucial to give them the opportunity to engage as well. Communication skills don't just naturally transfer from experienced planners to newer ones through osmosis because they're both in the room; at some point, skills need to be practiced to be developed, and the whole point of doing so while you're in the room with them is to support them in the process while ensuring that the client gets the necessary information in the end!)
Lack of mentorship
Experienced advisors have so much to teach newer advisors, and yet very little wisdom is passed from one generation to the next. Many times it seems like there is an expectation that younger advisors will just pick up on what the firm owner wants and expects, without ever actually verbalizing it. The one thing they don’t teach you when going to school for your CFP® certification is how to actually apply the book knowledge you learn, and as a firm owner it is your job to provide that training. Be sure they get it from you, because as hard as I have tried, learning through osmosis just doesn’t work.
Bonus tip: After every client meeting, set aside 15 minutes to discuss the meeting itself (not the client situation). Give your associate advisor feedback on their actions. Did they listen well? Give good feedback? Interrupt a client? Then, ask them what you could have done better, and take their feedback to heart. You might be surprised what you can learn from a fresh set of eyes.
They feel degraded
In a recent Wall Street Journal article Robert Sofia, co-founder of Platinum Advisor Strategies was quoted saying "You never want to bring in a younger adviser, someone without any gray hair, someone who's baby-faced, and put them in front of clients immediately." Imagine being a new associate advisor and reading that quote. How are your clients supposed to trust the new advisor you hired if you don’t trust them in the first place? Remember that clients will follow your lead; if you ever want to transition your firm and your clients to the next generation successfully, you have to demonstrate to your clients that your successors are worthy of their trust!
Bonus tip: Stop making statements in meetings like “You were probably in diapers when that happened” or using terms like “kiddo”. Treat your associate advisor as your professional peer, not your underling or junior, and your relationship with them will greatly improve.
(Michael's comment: This is a crucial issue I hear repeatedly from young advisors who leave their firms; "ageism" where younger advisors feel disrespected because of their age is a common retention issue.)
They feel underappreciated
If you're a veteran advisor, when you started in the business the CFP® certification might not have even existed, and if it did, it probably didn’t require a comprehensive test. You had to go out and find resources to learn the different topic areas, and then you had to create the concept of financial planning – you truly earned your dues. Those were valuable contributions to the profession, but times have changed.
Recent graduates may have been working with clients at their University’s planning clinic for several years, have written multiple comprehensive financial plans for actual clients, and learned how to use financial planning technology, before they ever set foot in a firm for the first time. Students graduate now with almost all of the tools they need to work with clients from day one, and yet they are still being asked to serve in the back office for 3-5 years before working with clients directly, with no appreciation of the capabilities they do bring to the table.
Bonus tip: While junior advisors may be good with technology simply because of their age, their value goes well beyond that. Utilize their complete skill set to ensure they don’t get bored working for you, and don’t just expect them to program your iPhone for you.
(Michael's comment: Having new advisors who join your firm spend a little time cross-training in various roles across the firm can be a good thing, but recognize that if you hire ambitious upwardly-mobile young advisors with the depth of technical training that today's CFP certification programs provide, they're not going to be content in those roles for long before yearning for more opportunity to grow!)
They want to serve their peers
While it is fine to have your associate advisor doing some work with your baby-boomer-aged clients, be sure they have the opportunity to work with their peers. Even if you have to establish a separate service model for younger clients, it will be well worth it in the end, both for their development as advisors and a younger more sustainable client base for your firm. Let them take the lead on the relationships with younger clients, and have them do the planning from start to finish. The great part is they can cut their teeth with clients that aren’t going to cost your firm quite as much revenue should something go wrong.
Bonus tip: Imagine how much easier it would be to recruit young advisors to your firm if you could say “you can be the lead advisor with your peers from day one here”, all while receiving mentorship from you. You would have more highly qualified advisor beating down your door than you know what to do with.
(Michael's comment: While younger clients may not have the financial capabilities to pay as much in compensation as your more senior clients, remember that your younger advisors don't need to make as much money out of the gate either. 100 young clients paying $100/month each on a monthly retainer basis is $120,000/year of revenue, which allows a very reasonable wage to a young planner while populating your firm with clients who can grow their income, assets, net worth, and advisory fees for decades to come.)
They are a lead planner personality doing the job of a paraplanner
We have this belief that all lead planners should first serve as paraplanners, then associate advisors, then graduate to lead planner. The problem with this theory is the best lead planners out there would make terrible paraplanners because the skillset and personality necessary to be successful are completely different. I encourage you to hire for the position you need, not the position you hope the new hire to fill one day. If you hire a lead planner personality and make them a paraplanner, they will likely get bored and leave well before you transition them up the ladder.
Bonus tip: Having a lead planner personality serve in the back-office for a while is fine as long as you are providing lead-planner opportunities. Give them opportunities to work with clients directly, and that will stave off them leaving… at least for a while. The flip side to this is not all paraplanners want to be client facing advisors. It’s okay to just let them be the best paraplanner than can be, and hire someone else to actually work directly work clients.
