Investing Strategies

Firms look to attract and retain tomorrow’s financial advisors

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Eat what you kill.

It’s not the most subtle description of the career path for financial advisors, but it is accurate.

Historically, the financial advice industry has been built around people who can come to the job and quickly build books of business to generate revenue. Young advisors have been expected to tap their friends and family for money and aggressively pursue new clients to bring assets to the table.

For the most part, graduates fresh out of college are not ideal candidates for this kind of work. But with financial advisors entering their 70s and a serious shortage of incoming advisors on the horizon, universities and colleges offering financial planning degrees are becoming a much more important source of new entrants to the industry.

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“This issue will become critical in the next five years or so,” said Marina Shtyrkov, wealth management research analyst at consulting firm Cerulli Associates. “The industry headcount is relatively stable now but it will decline more dramatically going forward.

“The schools will be an important factor in addressing the problem.”

The need is great. Cerulli estimates that close to 40% of the roughly 311,305 advisors in the country, managing more than $8 trillion in assets, plan to retire in the next 10 years. Headcount in the industry is expected to decline by 5.8% between 2017 and 2022 compared to a 1.6% increase between 2012 and 2017.

There are currently more certified financial planners over the age of 70 than under 30.

School administrations are answering the bell.

There are now more than 200 colleges and universities offering 300 financial planning programs that enable graduates to take the CFP exam, according to the Certified Financial Planner Board. That compares to about 125 five years ago.

Also, 44% of the programs are undergraduate degrees, 12% graduate and 1% PhD. Forty-three percent are certificate programs often taken at night and/or online.

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“We’ve grown from 20 students in our first class five years ago to over 120 now,” said Nathan Harness, an associate professor and director of financial planning at Texas A&M University. “We have more students who want into the program than we can place.”

Not every school, however, has had the success that Texas A&M has. Many programs have next to no budget and consist of a professor or two teaching a couple of classes.

At the end of the day, the number of graduates from university and college financial planning programs won’t come near to replacing the thousands of advisors expected to leave the industry in the next decade, some industry observers say.

“Between all of our programs, we probably have less than 2,000 graduates who earn their CFPs every year,” said CFP David Yeske, co-founder of Vienna, Virginia-based advisory firm Yeske Buie and director of financial planning at Golden Gate University in San Francisco. “That means there’s an incredible opportunity for young people coming into the profession.”

Indeed, the job opportunities for financial planning graduates are lucrative and many. However, it’s not always an easy sell to young people. The fallout from the financial crisis continues to taint the public image of investment advisors.

“I don’t think there’s a shortage of talented young people in the industry. The challenge is to get them to stick with a firm.

Jon Yankee

co-founder of FJY Financial

“Wall Street and banking are all the same to most young adults,” Harness said. “The most famous financial planner they know of is ‘The Wolf of Wall Street.'”

CFP Martin Seay was an exception. In 2008, when financial services firms were being regularly shamed for self-dealing and stiffing clients, Seay was just enrolling in the financial planning program at Kansas State University.

“I was excited about it but my mom said ‘don’t do it,'” he recalled.

While the Kansas State program has become one of the biggest in the Midwest, fighting the perception of predatory advisors remains a challenge for Seay, who now has a PhD and teaches in the program. “We’ve had to convince parents that financial advisors can be on the same side of the table as people,” he said.

As vital as recruiting young people to the industry is, retaining them is equally important. “Eat what you kill” is not exactly the kind of inspiration that typical millennials are looking for in their careers.

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“I don’t think there’s a shortage of talented young people in the industry,” said CFP Jon Yankee, co-founder of advisory firm FJY Financial in Reston, Virginia. “The challenge is to get them to stick with a firm.”

Yankee has been luckier than most. When he launched his firm in 2006, he immediately went looking for young advisors to recruit and struck gold with Laurie Belew.

A masters graduate in financial planning from Texas Tech University, CFP Belew, now 39, is a partner and senior financial advisor in the firm’s Midland, Texas, office.

“That success bred a desire in me to find more young people for the firm,” said Yankee. He’s admittedly had less success since on that front.

Patience is the key, said Yankee.

“It’s unrealistic to expect a 67-year-old couple to entrust their wealth to someone in their 20s,” he said. “You can’t know how to talk to a woman who has just lost her husband to cancer until you have experience. That takes time.”

As the industry shifts from a sales mentality to a more advice-centric model, many more firms are now willing to give young advisors that time to develop skills with clients and with building a book of business. That won’t entirely address the retention problem with young advisors or solve the looming manpower crisis in the industry, but that’s okay, said Yeske.

“No matter how good a financial planning program is, a 22-year-old graduate doesn’t really know what they want to do with their lives,” said Yeske. “That’s just reality and it doesn’t have to turn things upside down.”

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