As the industry's average age for advisers rises, recruiting young talent — seen by some as a wasteful expense — has become an increasingly critical investment for firms.
That was one of the main takeaways from a Financial Planning webinar on "How to recruit, onboard and retain young talent." Young planners are not only a bridge to the next generation of clients but also important to current ones as well, said presenter Jay Hummel, managing director and head of adviser training for Envestnet.
"I see a lot of firms where they look at [recruiting young talent] the wrong way. They look at it as an expense," said Hummel. "They say: 'Well, there's all this cost of training. I could have made an extra $100,000 this year if I didn't pay a planner.'''
Hiring a junior adviser without giving them the opportunity to help the firm grow is a common recruiting mistake that can keep the investment from paying off, Hummel said.
Developing talent is also vital to succession planning. Once their adviser is 55 years old, clients are already thinking about the firm's succession plan — even if their adviser isn't, Hummel said.
Young financial planners are vital to attracting millennial clients, said Rianka Dorsainvil, founder and president of fee-only firm Your Greatest Contribution. While millennials have not yet accumulated the wealth of older clients, they represent about 15% of investors with more than $2 million in assets. More than half of millennials expect to be better off financially than their parents.
Firms need to allow millennials to work to their strengths and maintain a culture of open dialogue, Dorsainvil said. For example, explaining the rationale behind management decisions and sharing firm performance figures can help young employees grow professionally and feel like part of the firm.
Firms should also support their employee's professional certification and allow ample time for exams and review sessions, she says.
Hiring well-rounded employees with diverse backgrounds helps both the firm and the clients, according to Samantha Macchia, CEO of Columbus, Ohio-based RIA Summit Financial Strategies.
Fee-only financial planning firms should also consider recruiting from wirehouses, Hummel added. There is a wealth of talent in their late twenties that may have become discouraged with their career paths in the sales environment, he said.
Other recruiting and retention tips from Macchia: Use internships as 10-week job interviews; build relationships with area colleges by getting to know professors; take advantage of speaking and teaching opportunities at schools. Macchia also suggests firms ask young associates to recommend prospects.
It's important that firm leaders invest their time and effort in developing and encouraging their young employees, Macchia said.
"Keep recruiting associates — even when they're here — so that someone else doesn't."