Young planners sitting pretty, Tibergien says

With operational costs growing and financial advisers in short supply, the demand for talent has put the value of young financial planners at a premium, according to industry guru Mark Tibergien. In the meantime, financial planning firms have an oversupply of clients, aren't doing a good enough job of retaining people and are struggling to make proper use of their staff members, the managing director of Pershing Advisor Solutions LLC in Jersey City, N.J., said at the Financial Planning Association's NexGen 2008 conference in Collegeville, Minn., late last month. Mr. Tibergien noted that a 2007 Pershing study, "Fast Forward," found that the industry needs to add 9,000 financial professionals over the next five years. That number doesn't even include the broker-dealer business, which has an even greater need for new talent (InvestmentNews, Sept. 10). With the increased demand, he said, employees will have a choice of a career with promotion opportunities, assurance of purchasing equity in the firm and compensation that reflects their contribution to the business.
"Advisory firms are becoming larger and more complex, and practices are now less of a culture of personality and more of a process," Mr. Tibergien said. "What is implicit is the need for more leadership, greater accountability and more specialization." Unless the trend toward larger firms continues, it will be difficult to create full-time positions for advisors, said Sabrina F. Lowell, an adviser with Mosaic Financial Partners Inc. of San Francisco, which manages $385 million in assets. "The challenge is to create career tracks and evolve into a profession with more-stabilized career tracks and more-stabilized salaries," she said.

RISING LABOR COSTS

Another factor that is stymieing advisory firms is that labor costs increase at a faster rate than any other expense in a practice, which will lead to an adjustment in fees charged to clients, Mr. Tibergien said. Additionally, firms will need to increase their productivity, and employees will have to be more versatile in order for the firm to continue to be productive. One perceived reason for the shortage of advisers is that many people coming out of college said that they shun the advisory business because they don't want a sales job, Mr. Tibergien said. He added that advisers who are entering the industry are developing technical skills that are superior to what their predecessors had, but they still need to develop business management and people management skills. "All of the recruiting [at advisory firms] has been focused on experienced people, and there has not been a great appetite in the advisory space to invest in the development of others," Mr. Tibergien said. Dan Mauck, senior financial adviser at Clintsman Financial Planning, a Southlake, Texas, firm that manages $50 million in assets, thinks that there is a shortage of people in their early to mid-30s, but the issue should be largely solved in the next 10 years. "It will be interesting to see how many additional degree programs will come online," he said. "The existing programs will grow in size, and over that time span, the people who are already out now will gain in experience, and there will be a significant increase in the number of people in that age range." According to data from the Denver-based FPA, the average age of an adviser is 53.

AN OPPORTUNITY

"More people in the business are in the downside of their life cycle than on the upside, and the average age has been creeping up every year," said Mr. Tibergien, noting that many studies have estimated that the average adviser is between 51 and 57 years old. "The good news is that more people are living longer and working longer, and as our wisdom increases, our energy decreases." For clients, this means that their adviser's energy level will ultimately be a decisive factor as to how invested they are in continuous improvement, Mr. Tibergien said. "There is a whole group of accumulators and inheritors right behind the baby boomers, and that growth opportunity means [advisers] really need to pay attention to the second and third wave of clients," he said. "If your leadership is in the 50-years-and-over age group, you might want to replenish that to ensure that your company is built to last." E-mail Aaron Siegel at asiegel@investmentnews.com.