How young advisors can build client trust

This is the 19th installment in a Financial Planning series by Chief Correspondent Tobias Salinger on how to build a successful RIA. See the previous stories here, or find them by following Salinger on LinkedIn.

New financial advisors starting at a registered investment advisory firm must confront a common concern: Are they experienced enough to manage a family's wealth?

Advisors of lesser tenure frequently complain that prospective clients either outright express doubt or imply that youthful planners haven't spent enough time in the field to win their business, according to Kris Carroll, a managing director in the Carolinas region of RIA aggregator Wealth Enhancement, and Melissa Caro, founder of coaching and training firm My Retirement Network. Real or not, those misgivings raise the bar for success for advisors trying to establish themselves in a relationship-focused business.

But younger advisors can tap into the wisdom of mentors who talk openly about the business implications of the profession's punishing failure rate and its potential perils for emerging generations. 

The fear that prospects will be skeptical of a younger planner can lead to new advisors "trying so hard to compensate up front" that they turn off potential customers, Caro said. Since it's not possible to become anyone else or add decades on Earth overnight, advisors should remember that people "come into any situation with our own biases," she said. The clients' qualms about a young advisor may simply stem from wondering whether they have enough life experience to advise people on divorce, elder caregiving or what to do after the death of a spouse. They just want to protect their life earnings and nest eggs and grow their wealth for their families.

"That's a huge deal, No. 1, so it's really important to keep that in mind if you're getting frustrated," Caro said. "You're dealing with the most important thing to them, and you're asking them to come in and trust you."

Advisors will need to gain that trust despite any number of potential image-focused criticisms, according to Carroll. He dresses like the old PBS children's show host Mr. Rogers because he has "always struggled with the perception that I'm not personable or I don't care," or that he is "cold and academic," he said. Age often does bring more knowledge of "how to deal with all of the interpersonal stuff that goes on in families," so younger advisors may need to accept some aspects of clients' hesitation, Carroll said. He leads pop-up classes of advisors across Wealth Enhancement's offices guiding them on key practice management and growth skills.

"In any professional services job, you've got to manage people's perceptions," he said. "If you're somebody who's naturally very warm and outgoing, you might need to wear a three-piece suit. You control your image."

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Numbers and anecdotes

Veterans in the field acknowledge it's a significant hurdle, though. The struggles early-career advisors face in breaking into the industry increasingly are becoming not just a professional development issue, but also a business risk to wealth management firms. 

With the number of wealth client relationships on pace to climb by roughly one-third to as many as 71 million by 2034, looming retirements and tepid increases or even slight declines in the profession's headcount will add up to a shortage of 90,000 to 110,000 advisors needed to meet customer demand in that year, McKinsey & Company found in a February report. That conclusion followed prior studies suggesting that about that many advisors will retire in the next decade and that more than 70% of rookies drop out of the field in their first five years.

But advisors and other industry professionals likely already know all too well how tough it can be to prosper in the field. The popular image of an advisor reflects the demographics of a profession that is predominantly older white men — so factors like race and gender can add another dimension to the struggles posed by real or perceived inexperience. On the other hand, sometimes being outside of the norm brings advantages to advisors who may be better equipped to engage with clients who will be part of that surging customer demand.

A discussion earlier this month at the SER Summit for Latinos in Financial Services on working with Hispanic clients brought some of those subtleties into focus. When the moderator, Elaine King, the founder of Coral Gables, Florida-based RIA firm Elaine King Family and Money Matters Institute, asked other panelists to introduce themselves by describing their "superpower," Hasan Ibrahim, the territory vice president for Prudential's central region, said his was "the resiliency to come back from rejection and to keep moving forward and keep growing."

"As you all know, this is a tough industry," Ibrahim said. "This is not easy, actually, when you come in, especially if you're not a blue blood and your parents, your grandparents, weren't in this industry, and you don't have those natural connections. Especially if you're a first-generation American or first-generation financial advisor, there's a lot of rejection. And you have to get used to that." 

Younger advisors and career-changers coming into the field can make it in wealth management, but that takes time, skills and knowledge. Miguel Gomez, the president of El Paso, Texas-based RIA firm Sophronia Wealth Advisors, launched his own advisory company last year, but he "grew from scratch" in the profession by "doing everything" around the office for his first employer in the industry, he said.

"If I have a tip for you, it would be to be as open as you can be to learn, be as willing as you as you can to learn," Gomez said. "Even if you have a degree, even if you feel you know everything, you probably don't know everything. You probably don't know anything. I didn't know anything, for sure, because I never worked in the industry. I had never worked in financial planning and didn't know anything about it. I just knew that there was a way to offer advice to people, so that's what I wanted to do."

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Tobias Salinger

Shifting the perspective

King shared the story of interviewing for her first job on Wall Street and being shown the door after learning that the company had none available.

"As he walked me out, the phone rang, and it was somebody speaking in Spanish, and nobody in there spoke Spanish," King said. "And he said, 'Hey, you speak Spanish, right? Why don't you take the phone call?' And I took the phone call, and he said, 'You know what? I think we need somebody that speaks Spanish.' I was in my 20s. He's like, 'Why should I hire you when you're not even the legal age to drink?' And I said, 'But I speak Spanish, and I can help you.' I got my first job because I spoke Spanish. So it's just the lesson of how our differences can be our biggest strengths." 

And sometimes that translates directly into a client niche. Faced early in her career with "high pressure on sales" requiring her to build a book of customers, Cely Castillo "started thinking, what could be my competitive edge?" she said. Today, she's the multicultural recruiting and relationship manager with wealth management firm Hilltop Securities. But back then at another company, she realized that she had marketable skills to advise new businesses, and she began reaching out to Latino entrepreneurs whose companies showed up in public records.

"So I had their info, and I called them, like, 'Hey, I'm here to serve you,'" Castillo said. "'You just filed for this business. I'm the business specialist.' I was a hybrid teller-banker, but I was a business specialist. Well, I was confident. And I started getting people sitting in the lobby. There were three, four people waiting on me, and everybody's like, 'What's going on here?'"

That method of finding a specific receptive base has also helped Terrell Stauffer, a financial advisor on Carroll's team at Wealth Enhancement who came into the field five years ago after learning under Carroll as his student in a course at the planning program at Winthrop University. His faith and presence at a local church, as well as the certified kingdom advisor designation, have created a lot of common ground with other religious Christians. In addition, he has grown a beard and taken to playing with his wedding ring a bit in client meetings.

Wealth Enhancement

The age comments from prospects happen "all the time," either as an explicit query asking him how old he is or a more indirect one about whether there is "a team behind you," Stauffer said. For retirees or other older clients, he often flips the question around by asking them the average age of the other advisors they're interviewing and reminding them that he'll be around to be their advisor for many more decades.

"The reality is that most financial advisors are in their 60s. Most of them won't be able to be with their clients," Stauffer said. "I'm going to be in the profession longer than they're going to be alive. And I think that's a winning factor."

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Finding the best route to success takes time

Regardless of the way that they address the question, advisors must expect it to come up. And they must formulate their own responses to it, because they "have to relate in some way" to the prospect to convert them into a client, Carroll said. So they can earn trust through vulnerability and saying things like, "I know I look young," as they talk about it directly. But they won't have to do that forever.

"One of the really nice things about this issue is that if you're young and you're struggling with it, that is a temporary situation," Carroll said.

In the meantime, advisors can invest their time in other ways, with tools like critiquing a video of their client presentations and trying to eliminate investment jargon from their talks with prospects, Caro said. 

"You need to be a really, really good listener, and you need to be a sharp communicator, because what you're trying to get across is clarity and accuracy," she said. "The greatest gift is being able to translate it into, 'This is what we're going to do for you and why.' … I think that younger advisors find this more difficult than the technical side, and the technical side is hard."