Firms work to make the most of their young advisers

Trend emerges of 20-something advisers taking on meaningful work sooner

Dec 1, 2013 @ 12:01 am

By Trevor Hunnicutt

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When Adam Thurgood started his career as an adviser in his early 20s, he already had a background as a financial analyst for Prudential Securities, but it still took two years before he was allowed to wade into client services.

Now, as the junior partner at HighTower Las Vegas, Mr. Thurgood, 36, and his colleagues are looking to 20-somethings not yet on their feet as financial advisers to tackle one of their industry's most nettlesome problems: managing their clients' money when it inevitably changes hands to the next generation.

The Henderson, Nev.-based practice, which is part of Chicago-based financial services firm HighTower Advisors, decided to empower two junior employees — Kyle Porterfield, 25, and Steven Paulson, 21 — with the responsibility of developing a business strategy for the next generation of clients. The move reflects a nascent effort by the industry to get young workers involved in meaningful projects sooner than in the past.

The HighTower team is just one example of how the model for bringing new advisers up through a practice is changing. In the past, new entrants to the field followed a traditional apprentice-type model, where they would learn the ropes from established advisers.

More: What NextGen advisers want from employers

Increasingly, firms are treating that training as more of a reciprocal relationship. And they are seeking the input of young and would-be advisers in a number of different ways.

Some put young employees in sink-or-swim, face-to-face interactions with clients, while others prefer to use their trainees in technical or research positions. Still others are tapping into their younger workers' skill sets in areas such as social media to bring their older workers up-to-date.

At HighTower Las Vegas, the junior employees came up with the idea of creating a Millennial advisory board, which brings together the children of wealthy clients to discuss what they want and expect from the firm.

“The numbers are shocking how few Millennials keep their parents' adviser, and that's what we're trying to solve,” Mr. Thurgood said. “They can relate to these people a little bit more easily than older people.”

The team's moves echo industry consultants who say that firms must be more proactive not only in training young advisers but in seeking their input in order to improve retention and harness communications technologies to meet the needs of the next generation.

“Five or 10 years ago, we still had the luxury. The current generation of advisers were still young enough,” said Kim Dellarocca, global head of segment marketing and practice management at Pershing, a support firm for independent advisers.

But less than a third of advisers are under 46, according to research firm FA Insight.

And now that the average adviser across most of the industry's channels is over 50, the industry lacks the capacity to serve younger clients at a moment when it faces a growing threat from the Internet, Ms. Dellarocca said.

“We open ourselves to disruption, because someone will figure it out,” she said.

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Ms. Dellarocca's firm has started its own so-called reverse-mentoring program to recruit young talent, pairing nine staff members under 40 with senior executives asking them for feedback on company policies.

“We're doing what we think [advisers] should be doing,” said Gerald Tamburro, 52, a managing director at Pershing. “This is a program we think will have a significant impact on the bottom line.”

Mr. Tamburro is being mentored by Pershing employee Erin Kronenberg, 30, from whom he seeks advice on using Microsoft Excel, among other topics, he said.

The young mentors also meet together and brainstorm ideas on topics ranging from corporate strategy to technology.

Young advisers are also working to develop social media, which for most advisers is a little-used and unproven tool for generating new clients, as a cornerstone of the practice.

Heather Ford said that she hopes eventually to add financial planning services and a social-media focus to her mother's accounting firm.

The 26-year-old student at Texas Tech University studies a curriculum of personal financial planning, which didn't exist until recent years and includes courses in social media.

“That's going to help me be more marketable,” Ms. Ford said. “You have to think about how you're going to market yourself and what you're going to offer a firm.”

At Cambridge Investment Research Inc., a panel of advisers 40-something and younger have also been tasked with brainstorming for the future. The advisers meet face to face, twice a year, and split into three subgroups focused on forecasting business models of the future, suggesting corporate policies and procedures, and developing technology solutions.

The program has been in place since 2009, and one of its first accomplishments was developing the company's social-media strategy, according to Amy Webber, the independent broker-dealer's president and chief operating officer.

“They've been really aggressive in pushing us,” she said.

Mark Tibergien of Pershing on the benefits of reverse mentoring


Generally, advisers are seeking the input of their younger employees through more informal means, often asking those who are more proficient with data and analysis to add value in those areas while they develop the arguably harder skill of relating to clients.

Many young advisers struggle to gain the trust of clients, most of whom are in their 50s and 60s, and who tend to see wrinkles and gray hair as symbolic of credibility but look past the other skills that those advisers can bring to the table.

Harvey L. Snider Jr. manages more than $150 million for Merrill Lynch clients with his two sons, Luke, 26, and Sam, 25, in Duluth, Ga.

He said that they face some resistance from clients, many of whom are elderly widows, despite the young advisers' empathy and skill using iPad apps to illustrate client presentations.

“Some of the comments that come back is that I just like being seen with the boys, but: "I like you handling the money,'” said the senior Mr. Snider, 54. “"You have the gray hair.'”

Beyond easing the transition to working with clients and strengthening a practice with new skills, creating a more reciprocal relationship with would-be advisers may also help alleviate the high costs and risks associated with bringing on fresh talent.

Hiring and training new advisers costs tens of thousands of dollars, a burden for small, independent firms, which earn between about $90,000 and $1.3 million in pretax income, on average, according to the 2013 InvestmentNews/Moss Adams Adviser Compensation and Staffing Study.

The expense speaks to the complexity of incubating new talent, as most firms reward client relationships with wealthy clients, but young advisers lack the tools, such as cold calling, that a previous generation of sales-oriented advisers used to develop their Rolodexes. Creating a more reciprocal relationship might give new employees more time to cultivate their skills, while still providing an immediate benefit to the practices in which they work.

For that reason, Jim Harris, an adviser who runs a practice management consulting firm, said that he often recommends that his peers take on a young trainee.

“The biggest reason why it doesn't happen more is because the advisers are shortsighted, and I've had to kind of push and prod and poke to get folks to do this,” said Mr. Harris, whose firm, Financial Practice Management Corp. is based in Marietta, Ga. “It needs to be done right, but if it is done right and the hire is correct, it almost always lends itself to making more money.”


For incoming advisers, new training opportunities with existing teams offer ways to get established when the number of spots in training programs at large firms have been reduced since the financial crisis, and going it alone comes with high risks.

“The financial crisis was really the kiss of death, but now they're starting them up again, but very selectively,” Sharon T. Sager, a 30-year veteran of the securities industry at UBS Wealth Management Americas and its predecessors, said of the training programs.

Her team manages $1.1 billion for clients.

“The failure rate of starting out on your own without any experience is huge,” said Kelsey Dougherty Plummer, 24, who assists a 46-year-old adviser, Pamela S. Rigsby, in developing investment solutions for clients at the independent Raymond James Financial Inc.-affiliated firm Pursuit Wealth Strategies in Raleigh, N.C.

Now advisers are increasingly having the “aha” moment that they need young advisers to succeed in order for their businesses to grow while clients' assets diminish as they spend in retirement, according to Joni Youngwirth, managing principal for practice management at Commonwealth Financial Network.

Young advisers also provide a way for firm owners to plan for succession and for firms to handle the extra labor that comes with growing practices.

“The age thing is kicking in, and they realize they've built up something that has genuine value, but unless they've got someone to take it over, they will not see any of that value,” Ms. Youngwirth said. “There's a pretty quick wake-up call.”


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