Career pathing: Developing NextGen advisers

The need for new talent in the financial advice industry has been well-documented in recent years. A number of advisers, broker-dealers, custodians and clearing firms now have invested in raising awareness around the profession of financial planning, and in many cases have committed to attracting “NextGen” talent to their firms or the firms they support.
But bringing new blood into the business is only the first step in initiating a generational restructuring of an industry. The ability to recruit new individuals into the business will not be as critical to its long-term success as the actual development of new advisers.
Simply put: Recruiting is a sales job. Developing talent is a full-time job.
For the next generation to succeed, employers have to provide more than just an upfront training and initiation program. A real commitment to career development, mentoring and continuing education will be needed.
Along the way, advisers — who largely will be held responsible for developing their own firm’s next generation — will need to provide new hires with clear goals and defined career paths, particularly if they hope to groom a successor (or successors) to carry on their legacy.
“Career pathing” is a term advisers should expect to hear more frequently over the next few years. How a new hire gets from new associate to partner will, of course, be as varied as the business models and services provided by the more than 28,000 registered investment advisers in the U.S. But the need to clearly document and identify employees’ next steps is universal.

STEPS ALONG THE WAY

The first step in career pathing will be to align the short- and long-term needs and goals of an advisory firm with the career goals and interests of a NextGen employee. This should be done formally — something that few firms currently do — and should be revisited consistently to see how both the needs and goals of the firm and the NextGen employee have evolved.
The next step will be to identify a timeline for promoting this individual to the next level, provided he or she meets or exceeds goals and objectives. For many new entrants, the long-term goal is to become a lead adviser with their own set of clients, and potentially a partner with an ownership stake in a firm. But in the short term, new employees often will serve in a support role to these lead advisers.
In our 2013 InvestmentNews/Moss Adams Compensation and Staffing Study, which was fielded in the spring, we revised our survey to begin gathering more information about support advisers in a specific attempt to identify benchmarks for career paths around these positions. While we are still in the process of analyzing our results, and we plan to release the final report in September, we have identified some preliminary findings around career pathing.
We found that there are four types of roles advisers primarily hold within firms in 2013: support advisers (or paraplanners), followed next in seniority by services adviser, then lead advisers and ultimately partners who are responsible for working directly with clients and attracting new clients to the firms.
Support advisers start out by servicing more accounts than they actually manage: Specifically, the median number of accounts serviced by a support adviser in 2012 was 90, while the median number of accounts managed was 50. They also service accounts with a median of $300,000 in firm revenue and manage accounts with $200,000 in revenue.
Once a support adviser “graduates” to service adviser, their responsibility for managing accounts increases. Service advisers handle accounts with a median of $400,000 in revenue and manage accounts with a median of $300,000. Below is a chart that details the how the overall mix of accounts and revenue serviced and managed breaks out from one level of adviser to the next, based on preliminary responses to the 2013 InvestmentNews/Moss Adams Adviser Compensation and Staffing Study:

Again, the path and roles will vary at each firm, but the above should serve as a good benchmark for how partners can transition client and account responsibility from one position to the next during the development of a junior adviser.
One other notable finding from our research: 35% of support advisers are certified financial planners, and that percentage increases to 47% at the service adviser level, followed by 60% at the lead adviser position. So, in addition to clearly identifying metrics for supporting and owning relationships and accounts, requiring certifications and commitments to education will re-enforce the ongoing development of a new adviser. At the same time, obtaining certifications or licenses could prove to be another clearly defined objective in a new adviser’s overall career path that will align the interests of both the firm and the employee.