Why young financial advisers need mentoring

A panel of financial staffing and career experts agree: mentoring is pivotal to the development of NextGen advisers. But what makes it such a critical part of adviser success?

If financial advisers want to build a strong and sustainable business, they need to develop a mentoring program for young employees.

“I’ve seen a lot of great people wash out of the business in their first two or three years,” Christine Gaze, TD Ameritrade Institutional’s director of practice management, said during InvestmentNews’ NextGen Virtual Career Fair on Friday. “Our research shows that firms with junior associate programs results in 44% greater income for the owner.”

(Pershing’s Dellarocca: Opportunities for NextGen financial planners are growing rapidly)

Guided support helps NextGen advisers find clients in their early years, she said, adding that seasoned advisers should consider taking their junior associates to client meetings to take notes and run analysis until they develop the confidence to take on their own clients.

“The expectation that the junior adviser should be beating the pavement from Day One is inconsistent with advisers’ need for succession planning with the next generation,” Ms. Gaze said. “The typical transition to a successor requires 10 years.”

Ms. Gaze took note of Cerulli Associates Inc.’s research showing that the average age of an adviser is 52 and that 26,764 advisers are expected to leave the industry between 2012 and 2017. In light of those statistics, TDAI offers NextGen scholarship and grant programs to attract top talent and promote young advisers.

Kim Guimond Dellarocca, head of practice management for Pershing, pointed to the disturbing statistic that only 5% of employees in the advisory industry are in their 20s. (Meanwhile, according to TDAI research, 42% of NextGen investors prefer to work with someone within 10 years of their own age.)

Addressing the youngest members of the webcast audience, Ms. Dellarocca laid out the differences between working for a bank, a full-service advisory firm, an independent broker-dealer or an independent registered investment adviser with fiduciary responsibility. “Be aware of your behavioral preferences, what your risk tolerance is and whether you have an entrepreneurial spirit,” she said.

A Pershing survey of college students this year found that 82% want a career that has a positive impact on others’ lives, 88% want to work in a career where their job cannot be outsourced, 90% want to work in a growing field and 97% are willing to work hard to earn more money.

“’To be a good financial planner, you have to care about people. In this profession, you’re rewarded financially. But you’re also rewarded morally,’” Ms. Gaze said, quoting a 27-year-old financial adviser in an anonymous research interview: “I help people keep their houses, pay for their children to go to college and achieve their goals. I help people in a way that truly improves their lives.”

Clearly, young financial advisers also stand to improve their own lives. According to TDAI research, certified financial planners are in the 79th percentile of earners within their first four years on the job, with an average annual salary of $94,000.