Tracking down the NextGen stars

Creating the NextGen advisor may sound like the newest science fiction series streaming on Netflix, but it’s actually a real-world endeavor wealth management firms labor at every single day.

So how are financial advisors preparing themselves and their firms for the future while still meeting daily challenges?

InvestmentNews strapped on a jetpack to speak with industry experts across the financial universe to find out.  

“The ideal NextGen advisor leverages technology for personalization and efficiency,” said Rory O'Hara, founder of Ausperity Private Wealth. “They focus on the client experience and understand the client’s financial wellness beyond just investments.” 

O’Hara points to the fact that financial plans are not only essential, but continuously updated as an example of the changing nature of the business and the direction that it’s headed. Gone are the days of the 40 to 50 page financial plan because the advisor now utilizes web-based planning that is accessible to the client 24/7. 

And when it comes to personalization, the NextGen advisor “completes and updates financial plans for each relevant family member, providing true family planning and is an integral part of family financial decisions large and small,” said O'Hara.

And while O’Hara sees the NextGen advisor as something of a Cyborg (half human/half web-based), Josh Harris, managing director at Coldstream Wealth Management, believes advisors need to be more than human calculators to be successful.

“NextGen advisors will need to be more than just good at math,” said Harris. “While they’ll need an expert level of competency around financial concepts, it’s the application of those concepts to real world clients that will set them apart.”

Added Harris: “In many ways, the advisor of the future will look more like a financial therapist than a mathematician.”

Bini Lee, head of planning at Facet, notes that clients have more free access to financial strategies and free financial tools online than ever before. And with all of that knowledge and access, clients will seek the help of advisors who can translate the science of financial outputs using the art of communication going forward. In that respect, Lee almost sees the NextGen advisor as an interpreter.

“Advisors need to be able to explain what the numbers mean for each individual and their family, the strategies clients need to deploy, and what actions they need to take to get there. Essentially, advisors must understand behavioral finance and how to navigate the emotional part of decision making,” said Bini Lee, head of planning at Facet

Meanwhile, E. Todd Rebich, pictured below left, president of Rebich Investments, part of Stifel Independent Advisors, sees all this talk of a NextGen advisor as pretty much overblown.

“I think the ideal NextGen advisor looks like the last generation of advisors,” said Rebich. “The things that were successful in the last generation are the same things that are going to be successful with the next generation. For the last 20 years, the industry has been acting like the world is changing, but at the core, building relationships stays the same.”

RECRUITING THE NEXTGEN ADVISOR

Now that we’ve learned what the NextGen advisor looks like, the next question facing advisory firms is where to find them. Or at least find out where recruits that may eventually fit that build may be currently residing.

Jerry Blakely, director of advisor sales training for Householder Group, says looking for young advisors with a few years in the business and a proven track record of success is less risky than betting on someone brand new.

“They are hard to come by, but that’s where we start,” says Blakely. “While word-of-mouth and family-member recruiting can be effective, and we have seen some success here, the high hurdle of academic proficiency demanded by NextGen advisors is a daunting obstacle for many.”

Blakely adds that he generally gets robust results using a third-party recruiting firm that reaches out to advisors with an active social media presence, especially on LinkedIn.

Wealth management is very much a referral-based business, and referrals are also where Andrew Graham, founder and managing partner at Jackson Square Capital, goes when looking for NextGen advisors to add to his team.

“The key for us is to find the most honest, hard-working, intelligent and conscientious people possible. Our standard needs to be above all client expectations,” said Graham.

Bini Lee, head of planning at Facet, pictured above right, meanwhile, believes recruiting out of schools that have financial planning programs is a great option, in addition to picking off advisors with 3 to 5 years of experience that may be seeking a change. She says this combination provides a good mix of planners that have some experience and planners that have no experience, but can relate easily to younger clients.

“If experts are correct in predicting that trillions of dollars will be transferred from older generations to newer generations, the NextGen advisors will do well as these newer generations will likely prefer to partner with advisors who have a similar profile to them,” said Lee.

Finally, the firm could always choose to keep it in the family when it comes to searching for NextGen advisors, says Maria Bethel, SVP of marketing and communications at Axtella.

“Recruiting a family member could be a natural progression for family-run firms desiring legacy preservation while ensuring that the business stays relevant through generational shifts. The essential factor here is merit: the NextGen advisor must earn their position through capability and dedication not just lineage,” said Bethel.

TRAINING THE NEXTGEN ADVISOR

Alright, we’ve identified the traits of the NextGen advisor. We know where to find them to bring them into the firm. Now it’s time to train them - plus the rest of the firm - to prepare for the challenges of the future.

“The best way to train a brand-new advisor is to teach them the basics of investor psychology, overcoming objections, building trusted relationships and uncovering goals,” said Householder Group’s Blakely.

People learn differently, says Blakely, so there needs to be a combination of face-to-face, classroom and one-on-one instruction.

“Training should include drills, role-playing, and practice with clients when possible. It is essential to track and measure the results of any training program, and it needs to be flexible enough to adjust when necessary,” said Blakely.

Coldstream’s Harris believes training new advisors begins with “understanding who your ideal client is and what that client needs.” 

He says training towards that goal is best done in person, helping younger advisors learn how to approach diverse subjects and to deliver advice in a client friendly manner. Harris adds that new advisors also should not be trained and then forgotten. 

“We believe establishing goals and checking in on progress throughout the year should be part of our training DNA,” said Harris.

And all this training takes time and patience, according to Rebich.

“We start with a lot of shadowing, one of the toughest things after they passed the tests is learning a new vocabulary. Words can make all the difference. We have them listen to a lot of conversations with other clients, conversations other advisors are having with their clients, which helps them,” said Rebich.

After that, he starts role-playing in training, utilizing realistic scenarios, as well as some technical education. On the whole, he says he does not truly expect a new advisor to be fully functional for a year.

“We get them at their best after about two years, but for the better part of the first year they're listening in on veteran advisors,” said Rebich.

When it comes to certifications, Ritik Malhotra, co-founder & CEO of Savvy Wealth, says CFP and CFA designations will always be important, yet he believes it’s even more critical for advisors to understand their area of focus and the specific niche they will serve.

“Essential to their role is a deep understanding of global markets and personal finance,” said Malhotra. “Institutional knowledge about regulatory environments, client relationship management, and digital toolsets for financial planning and analysis are also increasingly important.”

As for goal-setting, Axtella’s Bethel believes it’s all about balance.

“Early on, goals should include mastering the core principles of finance, ethics, and regulatory compliance,” said Bethel. “As they progress, advisors should aim to build a network of clients by aligning their own purpose with the clients' aspirations.”

For instance, within the first year, a new advisor might aim to onboard 20 new clients by leveraging the personalization and communication techniques learned from the firm’s Atlas program, according to Bethel.

“Ultimately, training a new financial advisor is not just about imparting knowledge,” said Bethel. “It's about inspiring them to see their role as a catalyst in transforming their clients' lifestyles and helping them achieve their purposes. It's about mentoring them to set and surpass their own professional goals while never losing sight of the human element that makes financial planning both a challenge and a profound privilege.”