On their own

From her 750-square-foot apartment in New York’s Harlem neighborhood, Lauren Lyons Cole offers a range of financial planning services to about 20 clients each month.

She has always had her eye on running her own practice, but it happened a lot sooner than she planned, because at 28, “there was no other option.”

Like many other Generation Xers and Yers with hopes of becoming a financial planner, Ms. Lyons Cole, now 31, found few appealing opportunities.

According to industry experts, most firms are much more focused on bringing in established financial advisers or those who are looking for a second career, rather than grooming the next generation.

However, overlooking the next wave of potential advisers is something that firms can’t afford to do much longer — not with the estimated $18 trillion to $28 trillion that the next generation of clients is expected to inherit from their baby boomer parents over the coming decades.

“The opportunity to service those clients is staggering. Folks aren’t looking at it strategically,” said George Tamer, director of strategic relationships at TD Ameritrade Institutional.

“We talk to adviser firms all the time, and they know the numbers,” he said. “They just don’t buy it yet.”

GENERATIONAL CONNECTION

Without having advisers who can connect with Generation Next, firms are risking watching that money walk right out the door.

A recent survey by Rothstein Kass & Co. found that 86% of heirs in global family offices intend to fire their parents’ adviser when they inherit the money.

The easiest fix to that dilemma is to have advisers on staff with whom the younger generation of clients feels comfortable working, generally meaning advisers closer to their age. The average adviser today is in his or her mid-50s.

“They don’t want some old guy or gal talking down to them,” said Kile Lewis, co-founder of oXYGen Financial Inc., a firm dedicated to serving Gen X and Y clients. “Having the ability to relate to someone like yourself is helpful.”

Even at oXYGen, though, there isn’t a training program in place to groom younger advisers. Instead, Mr. Lewis focuses on attracting breakaways from the wirehouses.

“We’re not large enough to build the structure you need to train someone in this business,” he said. “The industry has a real problem — no one is training reps anymore.”

In fact, wirehouses may be training more advisers than ever. Those advisers are starting later in their careers, though.

At Bank of America Merrill Lynch, which has a training program of more than 4,500, demand to enter the industry has never been higher, said Dwight Mathis, head of business development.

The added interest is allowing the broker to be much more selective in its hiring.

Mr. Mathis’ focus has been on attracting recruits who are looking for a career change, and he recently has been paying a lot more attention to military veterans.

“We’re looking for a track record of high achievement,” he said.

As a result, the average adviser in Merrill Lynch’s training program is 36.

LACK OF MENTORING

For wannabe advisers in their 20s, opportunities are far scarcer.

After Ms. Lyons Cole received her certified financial planner designation at 27, she was hired by a New York-based wealth management firm as a paraplanner, which she thought meant that she would be working with clients. On her first day, though, she was told that her official title was administrative assistant.

During the 13 months Ms. Lyons Cole worked at the firm, she didn’t work with a single client.

“They were like, “Don’t even look at clients,’” she said.

A recent survey by InvestmentNews of advisory firms and young people who are planning to enter the industry illustrates the disconnect between the two groups. While 62% of the young people said they are most interested in working with clients, only 22% of the firms said that that would be the primary role of a recent college graduate they hired.

Ms. Lyons Cole’s frustration over a lack of mentoring or a career path is what led her to start her own firm.

It is a scenario Mr. Tamer said isn’t uncommon.

“Career path is important to young advisers. They talk to clients about these things, so they know,” Mr. Tamer said.

“People aren’t leaving because of pay; they’re leaving because they don’t feel like they’re contributing,” he said.

At Wells Fargo Advisors LLC, bringing in and training new advisers is “mission-critical,” said Dorian Hanson, who oversees the company’s Next Generation initiative.

But to do so, she has to change the way that Wells Fargo thinks about young advisers.

“We recognize the next generation will look a lot different than the ones that got the industry to where it is today,” Ms. Hanson said. “It’s a new page in the playbook.”

To make things easier for advisers just entering the workforce, Wells Fargo is building adviser teams.

“The industry of yesteryear was based on sole practitioners. The individual adviser would work and thrive on their own,” Ms. Hanson said.

“The climate is much more complicated now, and client needs are much more complicated,” she said. “When you think about the adviser of tomorrow, one can’t be all things to all clients.”

The rise of financial planning as a major at schools such as Texas Tech and Virginia Tech universities may make it appear that there is an easier path for some would-be advisers. But that isn’t necessarily the case.

Ms. Hanson said she is exploring those programs as something that the company could support, but it is “too soon to tell.”

College grads are more the exception than the norm at Merrill Lynch, and Mr. Mathis said that the rise of the programs doesn’t change recruitment strategies.

“We applaud that effort to prepare students more formally, but it doesn’t change what we’re looking for,” he said.

One of the problems that the college programs don’t solve is the client relationship aspect, said Scott Slater, managing director of business consulting at Schwab Advisor Services.

“It’s not just about managing portfolios and doing plans but being able to bring the right relationship skill set,” he said.

“It’s a very personalized interaction. That’s what the client values,” Mr. Slater said.

Part of the problem is the advisers themselves, he said.

“Advisers didn’t go into the business with the intention to train people and coach them,” Mr. Slater said.

Brittney Castro is one of the rare advisers who was able to get her start right out of college.

Ms. Castro, a 28-year-old principal at Perennial Financial Services LLC in Los Angeles, began her career at Ameriprise Financial Inc. at 22. She credits some of her success — she manages just under $10 million less than two years after striking out on her own — to the training and mentoring that she received at Ameriprise, where she was able to work with clients from the very beginning.

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