SAN DIEGO — Here’s a novel idea to grow your practice: Hire young employees. Why aren’t more firms doing it?
For one, assets. The first question many young candidates receive is about what they can bring to a practice financially, said Kate Healy, managing director of NextGen at TD Ameritrade Institutional. Healy, who was speaking on a panel at the TD Ameritrade National LINC conference, added that’s the wrong way to think about new hires.
“Not everyone wants to be the rainmaker,” she said. It will take time — and practice — to grow into it.
“I was 20 years old and asked to go find million-dollar clients,” said panelist Alan Moore, co-founder of XY Planning Network, who was fired from that early financial planning job. Moore said he was trying to bring in clients who made $300,000 to $400,000 a year. The firm regarded those clients as too small.
It also puts new advisors in a challenging position; one that might be destined to fail.
“Who’s going to want a 23-year-old advisor?” Kelly Bradley, a newly hired financial planning assistant at Trinity Wealth Management, said on the panel. She adds: “[In college] you just learn from textbooks, but you don’t understand the entire industry.You just learn little facts.”
Still, younger advisors can bring needed skills and efforts to the firm, even before they form their book of business.
When Marjorie Wentz, an advisor at Trinity Wealth Management, hired Bradley as an intern, she soon found that Bradley’s efforts helped others save hours of time. Bradley began by taking notes during client reviews, and eventually began overseeing operations management after the firm lost its previous ops manager.
“She was so good that we didn’t fill the spot for six months,” Wentz said.
Clients’ children also gravitated toward Bradley at quarterly events because of her younger age, establishing a new kind of connection.
“Death and taxes are inevitable, so if you don’t know the younger generation, that money will leave,” Wentz said.
Once a firm has decided to expand its roster of next-gen planners, there are several steps they should take.
First, during interviews, don’t assume the candidate is only out for a big compensation package. For many, it’s more than that.
“Learning is the big opportunity. I don’t care about the money,” said Josh Hartman, a Central Washington University student, in an interview after the panel.
Second, help raise awareness of the industry.
“Most younger people don’t know what we do for a living,” said Moore in an interview after the panel. Job postings primarily come from large, established firms that often have products to sell, not from RIAs that offer holistic financial planning, he added. The retention rates for these programs are low, he says, and could cause participants to turn away from wealth management altogether.
“I don’t want to work at a firm that wants me to sell door-to-door,” Austin Allen, a student from Brigham Young University in Utah looking for an internship at the TD conference, said after the panel.
Once you’ve hired a young advisor, remember that most want hands-on experience, according to Moore. Advisors should provide those opportunities in a variety of ways, such as allowing young hires to sit in on client reviews.
“It doesn’t mean they get to talk in the meeting,” Moore said during the panel discussion. “It does mean they get to be in the meeting.”
Grappling with the cost of another salary can be a deterrence. When a firm is small, with as few as one or two people, a new paycheck will coming out of another advisor’s pocket.
“It’s a mental accounting trick,” Moore told Financial Planning. Consider the time a new hire will free up for others to grow the practice. And the cost may not be as prohibitive as many firms think. “If you can’t bring in another $50,000 to 60,000, I mean come on,” Moore said on the panel.
Wentz’s team evaluates each new hire by tracking how many new assets they would need to bring on to pay for another salary. That tends to be about $1.5 million. “If we can’t do that, shame on us,” Wentz said on the panel.
However, advisors should be wary of overpromising, according to Moore. Moore said he’s seen firm owners entice new employees with equity, ownership and succession. Later, the owners realize they didn’t want to give up so much.
Once advisors realize they’re not running day-to-day operations, yet maintaining their salary, they’ll forget they made those promises, Moore said.
Finally, advisors shouldn’t overly worry about forming a specific step-by-step process or plan for all new employees. They just need to communicate, Moore said.
“We are just learning as we go.” Bradley said about her position.
