Even if colleges ramp up degree programs in financial planning and related fields, advisory firms are going to have to rethink their hiring philosophies to meet the growing demand for investment advice, according to industry representatives and academics.
Putting it rather bluntly, Deena Katz, an associate professor of financial planning at Texas Tech University, argued that advisors can no longer expect to hire only seasoned, mid-career professionals with an established book of business.
"The model's broken," Katz said during a panel discussion at the Financial Services Institute's OneVoice conference. "Hiring people to start producing when you bring them on from day one isn't going to happen anymore."
Much of the next-gen challenge involves demographics. Citing various industry reports, Pershing Director Kim Dellarocca offered the alarming projection that 25% of advisors are planning to retire in the next decade, meaning that the industry will need some 237,000 new entrants to replenish their ranks.
"We are really worried that there simply aren't enough financial advisors to serve the number of investors who want high-quality advice," Dellarocca said. "Our businesses need to be about longevity and sustainability."
Too often, advisors are dismissive of the value that recent college graduates can bring to a practice, even if they don't start racking up the sales from the outset, the panelists argued. At Texas Tech, for instance, students must complete a residency program before graduating with a financial planning degree. They also gain broad exposure to many of the technology programs that firms use, thanks to grants and donations from industry partners.
"They can run almost any software package you want," Katz said.
To be fair, Texas Tech is perhaps the most prestigious financial planning program in the country, and thus not entirely representative of the constellation of programs around the country, which vary widely in the degrees or certificates they offer, their curricula, faculty quality and administrative support.
But the field, as an academic discipline, is growing, and the CFP Board is working actively to help develop and certify new programs that will have a hand in producing the next generation of advisors -- if firms are willing to hire younger.
"I think this is one of the biggest issues facing our industry that no one wants to address," said Brian Nelson, vice president of advisor programs at National Financial, a Fidelity Investments company.
The panelists urged advisory firms to ramp up their presence on the campuses of local colleges. Those partnerships can take many forms, such as offering internship programs or dispatching advisors to visit campus businesses clubs, delivering guest lectures or teaching adjunct classes.
In a poll Pershing commissioned last year, 96% of college students said they had heard of the financial advisor profession, but just a quarter of the respondents said they were "familiar" or "very familiar" with the field, and only 7% said they were interested in a career as an advisor.
But before firms plant a flag on campus, they first have to identify the schools in their area that offer a program. An obvious step? Perhaps, but too many advisors, Nelson suggested, are so focused on their own practices and serving their current clients that they don't pause to consider the strategic value that could come from reaching out to a local college.
"If we're not focused on the people who are graduating with these degrees and we're not aware of the programs, they're certainly not aware of us," Nelson said.
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