People are eagerly awaiting their arrival. But they're already among us. They're ready to move the planning profession forward and are in a strong position to do so. I'm talking about fee-only RIA firm owners and tenured financial planners younger than 30.
Take, for instance, Ben Hockema. He's a 24-year-old associate at Deerfield Financial Advisors in Park Ridge, Ill. Hockema is a 2010 graduate of Purdue University where he majored in economics and was a leader in his fraternity, Alpha Tau Omega.
Before graduating, he interned at Deerfield Financial, where he learned how a planning practice worked, what systems the back office needed for advisors to work effectively, and started to learn what clients need to feel valued. Hockema has worked at Deerfield for two years and is in the midst of a succession plan because of a company acquisition. By the end of 2013, he will lead an office of more than 80 clients and $150 million in assets under management.
Jacob Kuebler, 26, has been a succession planning success story over the past few months. Indeed, his journey has been discussed in succession planning panels at the Alliance of Cambridge Advisors annual conference and NAPFA National. A graduate of the University of Illinois, where he majored in financial planning, Kuebler is now working toward a master's degree in financial planning from Kansas State University. Living in the college town of Champaign, Ill., he realized that he wanted a career in financial planning, but didn't want to sell products. He heard Karen Folk of Folk Financial Planning (now Bluestem Financial Advisors) speak at his university and asked her for a job. Kuebler started working for Folk immediately after graduating and has not looked back. Four years later, the firm's succession plan has resulted in a client base that has nearly doubled and Kuebler has become an equal partner.
Much has been said the last few years about carrying out succession plans within firms, either with current employees or through outside acquisitions. Yet there are firms looking far into the future by enabling planners 30 and younger to become leaders. While this shows a great amount of trust in a somewhat inexperienced partner, it also reveals that these young planners are proving themselves to be competent in rising to new challenges. With the right support, training and development, these young partners should have a fruitful and successful future ahead.
DEVELOPING GEN Y LEADERS
According to the CFP Board of Standards, just 3% of planners are younger than 30. With the average planner in his or her mid-50s, it is surprising how many who are 30 or younger have a commanding position within their companies or run their own firms.Many young planners have an advantage because their firms are small practices that have a limited number of employees to handle all the tasks associated with running a RIA. Owners can delegate jobs (and even entire roles) to staff and provide younger employees a great deal of responsibility.
While some firms that hire planners in this age demographic are boutiques, they are not necessarily small compared with other fee-only firms. Financial Focus, in Wolfeboro, N.H., employs seven and manages more than $145 million for 160 households. Rachel Sanborn, 29, is the firm's chief compliance officer, investment research analyst and financial planner. Having worked in various positions in the financial services industry, Sanborn joined the firm in 2007. The owner, Susan John, is guiding Sanborn to become a seasoned planner with the hopes that she may become a leader of the firm. But not all of it comes naturally.
"When I started here, I felt like clients were not really going to trust me,'' Sanborn says. "I mean, it would be hard even for me as a 20-something to take another 20-something's advice on topics as important as money and life savings seriously. Taking on the role of CCO, even with all the hassles it entails, I think gave clients something to latch on to, to be able to trust me more."
While many younger planners are finding a great fit working for boutique firms, others want to call the shots and run their own firms. The excitement of entrepreneurship, coupled with designing the framework of client services, has enticed some planners to start their own shops. It is common for these planners to have worked for other firms before working for themselves.
Lindsay Elwood, 30, started her financial planning career in 2005 at Evensky & Katz Wealth Management in Coral Gables, Fla., as an associate, before moving in 2006 to Athens, Ga., to set up her own office in collaboration with Amicus Financial Advisors in Lubbock, Texas. After deciding to move to Athens, Elwood looked for an established firm in the area that concentrated on holistic, comprehensive planning. When she couldn't find a firm that matched her own philosophies, she decided to start her own practice, while consulting regularly with mentors who had gone through similar journeys. In 2010, she broke away from Amicus and registered her own fee-only firm with her partner Joseph Goetz.
"Owning a practice is rarely an easy task and comes with a lot of stress that most 20-somethings don't - and probably shouldn't - have,'' Elwood says. "But at the same time, I can't imagine my life any other way and would do it all over again."
Alan Moore is infectious to be around. Moore, 25, is on the leadership team of NAPFA Genesis, which helps develop NAPFA members who are 33 or younger. Joining the board six months after its inception, his energy and passion has helped the group develop initiatives that have involved many members. This passion has led Moore to create his own fee-only practice, Serenity Financial Consulting, in Milwaukee. After spending two years at two fee-only firms, he decided that starting his own shop was the only way he could achieve his career goals at his desired pace.
"There was an expected career path, but there seemed to be no flexibility to accommodate a young advisor who wanted to own a practice one day,'' Moore explains. "I finally had to accept that no firm was going to let me progress up the career ladder as fast as I felt I was capable of, so I had to decide if I was going to accept a slower climb up the ladder or start my own firm."
WHAT YOUTH MEANS TO YOU
What do these young folks mean for the planning profession? Firm owners should consider not just filling a current position, but also finding a new leader or company owner. They need to be seeking out prospective employees who are committed to the profession, but also a good fit for their firm's values and culture.
It can't stop there. If owners want to retain these employees, they need to be involved with their professional development, provide regular feedback and ensure that these employees are engaged with many aspects of the firm.
Gen Y planners need to be asking hard questions about their employers and themselves early in their careers. Do I want to work for someone, run a firm or work for myself? Is there a place for that dream where I currently work? If not, what do I need to change and how do I get prepared for that change?
Succession plans need to be viewed in a new light. It doesn't have to be a 60-year-old planner selling his firm to a 45-year-old planner. What if the new owner is 30? The components of the sale would be different, but maybe such a transition would benefit both planners as well as clients.
In the coming years, younger planners may run more firms. With Gen Y members outnumbering the baby boomer population, this may bring about new marketing possibilities, different client focuses and revenue structures. Because of these changes, the profession could look very different by the time these Gen Y planners start searching for their successors.
Dave Grant is a financial planning analyst with Vantage Financial Partners in Arlington Heights, Ill., and founder of NAPFA Genesis, a networking group for young, fee-only planners.
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