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Next-Gen Impact

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The sustainability of financial services businesses depends on the incorporation of new talent. The demand for next-generation talent continues to increase as longevity, continuity, and staying competitive become top priorities for many financial advisor-owners.

Next-generation advisors are in a unique position to leverage their generational experiences and opportunities that influence business value to carve out their ideal career path.

Opportunities Abound

The demand for financial advice is growing faster than the number of financial planners available to provide it. Household assets are increasing and the number of households with over $200,000+ in income has increased 10% in the last two years and is expected to climb.1 Along with accumulating their own wealth, younger investors are set to receive inheritances from their parent’s generation. The need for asset management is further exacerbated by the fact that the average age of financial advisors trends older so many are set to slow down or retire over the next ten years.

The battle for talent is upon us and it is important to recognize that as a next-generation financial planner, you have more career choices than ever. You can start your own business, or seek employment at a broker-dealer, bank, wirehouse, or RIA. Even those choices have many options within themselves. For instance, in terms of joining an RIA, 15 years ago, small firms were often the only option. Today, you can work for a smaller regional enterprise, a national company with hundreds of advisors and staff, or an RIA somewhere in between.

RIA size and culture vary, and it’s a matter of individual personality, working style, and career goals. A small, local firm offers benefits of closer client and colleague relationships, more opportunity for internal succession, and more of a voice in the business culture. On the other hand, larger RIA firms may offer more stability, more established processes for training and advancement, and the opportunity to have a more specialized role. You may thrive in a large, corporate structure or prefer the intimacy of a smaller enterprise. Because firms are structured in many different ways, you’ll want to know if your desired career path is available to you from the beginning.

Alternatively, you may consider starting your own RIA. While establishing a business from scratch may require more time and dedication, the benefits of immediate and majority ownership may be worth it. You’re free to call the shots and create a business with operational and investment philosophies that you dictate. All successful RIAs started the same way, and those founders figured it out as they went. The lessons they learned, luckily for you, have created significant changes in the last 15 years.

Instead of wearing all the operational hats, dealing directly with regulators, and filing piles of paperwork, there are now a variety of tech resources and consulting firms that can help you lay the groundwork for your business and keep it running efficiently. Professional organizations like the FPA provide support, community, and access to tools that make business ownership all the easier.

As a next-generation advisor in demand, you get to choose your own path. Acknowledge your own strengths, preferences, and goals to shape the career you want.

Leveraging Your Next-Gen Value

As a younger advisors, your age can recommend you to a business with a desire to grow. Your generational experiences and habits can help boost the value of a business in a variety of ways.

The most affluent group of investors–51 to 70 years old–are entering the “decumulation” phase. To maintain asset levels during this time, financial services businesses need to cultivate a more diverse age range of clients. As an aging profession, however, the generational gap between veteran advisor and new investor has become problematic.

Our 2019 Trends in Transactions and Valuation Study2 found that businesses that included younger advisors on their ownership team had more variety in their clients’ age demographics. They had a higher percentage of 31- to 50-year-old clients while still maintaining a significant percentage of the 51- to 70-year-old clients. The balance of client age demographics is an indicator of growth and preservation of value as the older investors begin to retire and take advantage of the life they’ve been investing for. Younger investors–and their growing wealth–can replace those managed assets. As a young advisor, you can bridge the generation gap and boost business value by connecting with and nurturing the next generation of investors–whether they are new clients with climbing wealth or the heirs of current clients.

The financial services profession is changing quickly. It’s hard to say where things will be ten or even five years from now. Your generation, however, has always experienced constant change and this flexibility gives you the advantage of facing the profession’s evolution and potential market fluctuations with agility and patience. This familiarity with change is largely related to the rapid evolution of technologies in your lifetime. Your ability to harness new technology quickly can help create efficiencies in portfolio management, client service, operations, and marketing that will supplement the existing business processes. Businesses with higher levels of technology have shown to have higher value3 and the desire to leverage available technology is evident by the increasing number of fintech companies popping up (a whopping 76 exhibited at TD Linc this year).

Most importantly, you can provide continuity to a business. One of the largest business concerns in this industry is protecting clients if something should happen to the advisor-owner of a business. With a team of advisors, businesses are protected against the unexpected exit of any one owner. Enterprises with built-in sustainability have more stable value and the structural foundation to facilitate continued growth

Generational relatability, adaptability, technological acumen, and longevity are likely just a few of the reasons multi-owner enterprises that included younger owners saw a higher growth rate than single-owner practices or multi-owner businesses that included only older advisors in 2018.4 As a younger advisor, you can help boost the value and growth of a business in many ways. 

The Asset of Time

Perhaps the largest advantage you have as a next-generation advisor is time. You have the time to figure out the career path you want, to explore employment opportunities, and to develop your personal short- and long-term strategies.

As you explore your options, be up front about your career goals with potential employers. You have the benefit of searching until you find a firm that aligns with your personal growth goals. Once you’ve found the right opportunity, you have the time to develop an ownership mentality, implement new ideas and practices, and prove to the existing ownership that you’re leadership material.

The most effective business growth strategies, including acquisition, internal succession, and enterprise building require the time to build foundations and execute plans. Unfortunately, many business owners discover this too late to achieve the full potential of their value. As a new advisor building a new business you have the opportunity to take the time to explore a variety of growth strategies and to combine them for maximum growth. Additionally, as new talent to an existing firm, you can be a catalyst for new growth and give the business the time to implement these strategies.

Strong, sustainable enterprises benefit from the experience and wisdom of advisors who have been in the industry for many years paired with the energy and new ideas of the next generation. A diverse ownership team provides increased opportunity for growth as well as protection of the business’s clients and value. As a next-generation financial planner, understand your role in this synergistic relationship as well as your value to the growth and longevity of an enterprise.

The possibilities are plentiful for next-generation talent in the financial services industry. Leverage the advantages you have and the options available to you to shape the career you want.

G2 Perspectives: Cultural Fit and the Ownership Mentality [Roundtable Talk]

1. Bloomberg Database, June 2019
2. FP Transitions 2019 Trends in Transactions and Valuation Study, May 2019, pg. 42
3. Ibid, pgs.25-26
4. Ibid, pgs. 40-44

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