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Training and Succession Planning Needs an Overhaul

By Chris Hall April 13, 2017

Well-established concerns over the aging of the financial advisor community have led to much soul-searching by the industry, especially among those responsible for recruiting and training the next generation. But smart firms are not looking to replace today’s rainmakers on a like-for-like basis.

While new recruits have much to learn from pioneering veterans, today’s transition is more fundamental than traditional succession planning. Wirehouses, independent broker-dealers and RIAs alike are taking the urgent need to re-staff as a catalyst to work with academia to reshape an industry into a profession and to refocus advisors on solutions rather than sales. As this shift gathers momentum, some skills will be passed on, some will be automated, and others will be made redundant.

“Advisors need emotional intelligence, empathy and communication skills to build long-term partnerships with clients,” says Matt Doran, principal at Edward Jones for financial advisor career development. “Advisors have got to understand the products and the technology, but this is a people business.”

On a day-to-day level, this pivot often leads to a more collegial, collaborative approach within firms with teams working collectively to grow assets, gradually replacing an individualistic culture that encouraged lone wolves to ‘eat what they kill.’ More broadly, it also responds to the need to rebuild client trust after the financial crisis, to adjust to the automation of investment management processes, and to attract a generation of millennials motivated more by the idea of helping others than enriching themselves.

“With succession planning on everyone’s agenda, we found a lot of firms needed to find a way to improve mentorship.”
Lisa Salvi
Schwab Advisor Services

“Aging means we need new talent. Many millennials don’t know what being a financial advisor entails, but universities have been helping to raise awareness,” adds Doran. “Once they understand, millennials’ desire to have a social impact makes financial advice an attractive option.”

The intended outcome is the maturing of financial advice into a more widely-understood and valued profession with a structured career path based on continuous learning in which relationship-building skills and the achievement of client life goals play a more central role than stock-picking or sales targets. This, sources say, is in keeping with the momentous upcoming challenge of helping Americans navigate extended periods of retirement at a time of declining certainty over pension values.

With more than 240 courses informed by a very precise yet fluid awareness of the industry’s future skill needs, by virtue of their accreditation by the Certified Financial Planner Board of Standards, universities are in the vanguard of this process of professionalization. Courses are also partly funded by the giants of the industry, resulting in multilateral links with faculty and students in the form of software provision, internships, conference attendance, talks and presentations – both in-person and virtual.

Partly at the behest of the CFP Board, courses have evolved recently to ensure graduates can quickly contribute to the setting and achievement of client goals. This means ‘softer’ relationship-building skills are being developed alongside more traditional technical skills such as account opening or tax projections. As such, many courses require students to show they can explain a proposed action to a client in a variety of contexts – in person, via email or even through video conferencing.

“The industry has told us that graduates must be able to communicate and synthesize in order to hit the ground running,” says Deena Katz, associate professor in the department of personal financial planning at Texas Tech University.

Deena Katz

Internships, graduate and early-career training programs are also increasingly focused on honing the relationship and technical skills that will let juniors contribute to meeting long-term goals rather than winning business and growing assets under management from the get-go.

Critically, these changes in emphasis are being accompanied by a reappraisal and reconstruction of workflows by providers of financial advice large and small. The shift away from the established ‘find, mind and grind’ approach is, however, uneven.

According to Duncan Williams, assistant clinical professor of financial planning, housing and consumer economics at the University of Georgia (and a former practitioner), the first wave of independent RIAs developed a comprehensive service model to ensure the stewardship of customer assets met fiduciary standards, with workflows geared to match both specific client needs and the pace of skills development among junior advisors. This approach is less easily transferable to single practitioners or large sales-driven networks, despite recent efforts at both ends of the spectrum.

“Firms that continue to hire young advisors long on positive sales attitude but short on technical competence are inviting liability risk and failing to ensure that their most profitable practices stay in-house,” says Williams.

But many wirehouses and broker-dealers appear to be taking a proactive role in engendering a change of tone and substance within their teams and networks.

Cheri Lytle, head of advisor strategy and development at Merrill Lynch Wealth Management, suggests a transition toward a more team-based approach to servicing clients is well under way, with each individual ‘team FA’ contributing to the fulfilment of client needs by taking on whichever of the five roles within an optimal practice model best reflects their skills and abilities.

“We’re not looking for stock-picking skills because we’ve got models for that. Today we talk less about the S&P and more about client goals,” says Lytle.

To bed in permanently, multi-faceted team structures and clearly defined workflows and career paths must be nurtured by a new generation of practice leaders.

Launched four years ago, Charles Schwab runs a leadership program to equip senior advisors of around 20 years’ experience, perhaps already equity partners, to succeed practice founders.

“With succession planning on everyone’s agenda, we found a lot of firms needed to find a way to improve mentorship,” explains Lisa Salvi, vice president for business consulting services at Schwab Advisor Services.

Williams and others see the structure of financial advisor career paths inverting convention, with young advisors learning to grind, then mind before being given the responsibility to find. Certainly, that’s been the experience of Yusuf Abugideiri, a senior financial planner at 20-strong, $500-million-in- management-planning firm Yeske Buie, who is only now taking responsibility for bringing in new clients after a decade developing his client management skills whilst overseeing the firm’s three-year ‘in residence’ training program.

“Rather than individual ownership of clients, we become lead advisors on accounts when we’re judged ready,” he explains. “All progress depends on client satisfaction and our ability to build plans that fit their value system.”