OK, fellow Boomers, let’s talk about the future


The American financial industry has weathered countless challenges throughout its history. Bull markets turn bearish. Economic expansions are interrupted by recessions. Exogenous natural or geopolitical events weigh on investor confidence and strategic business plans. Occasionally a crisis comes along that raises questions about the fundamental soundness and stability of the system itself.

I’ve experienced all these phenomena firsthand. I’ve never considered any of them to be existential threats because such challenges often create opportunities. That may prove to be the case in this instance, but I’ve never seen anything quite like what faces our industry now.

[More: Still overlooking millennials? Not OK, Boomer]

According to J.D. Power’s 2019 U.S. Financial Advisor Satisfaction Study, the average financial adviser in America was 55 in 2019, with one-fifth of that population being 65 or older. Only 11% of advisers were 40 or younger and, according to a 2018 PwC report, only 10% of millennials working in the sector at that time planned to stay for the long term, with 48% saying they were actively seeking new opportunities.

This seems to point to an increasing number of empty desks at wealth management firms over the next five to 15 years, with the industry poised to lose half or more of its most experienced advisers and, within the same window, many of their clients.

Why Next-Gen Talent Is Essential

Beyond the potential decline in wealth management revenue as older advisers and their clients age out of the industry or pass on, without succession plans in place, there’s a potentially huge opportunity cost associated with the underrepresentation of younger people in wealth management careers.

A recent report by Coldwell Banker shows that there were already more than 600,000 millennial millionaires in the U.S. in 2018 and over the next 25 to 30 years, millennials stand to inherit as much as $68 trillion. Various surveys over the last five years have found between 66% and 95% of heirs do not remain with a parent’s financial adviser after inheriting $2 million or more.

How likely do we think next-gen clients will be to stay with a firm after their parent’s adviser is gone?

If wealth managers want to remain relevant to this emerging market, they need to be serious not only about recruiting younger financial advisers, but also integrating that next-gen talent into existing client relationships.

If the data isn’t convincing enough, consider the conventional wisdom that our business is built on trust. Our clients want advisers they can relate to — someone they believe can understand their situation and help them achieve what’s important to them. If you are among those who dismissed the “OK, Boomer” movement as offensive social media snark, you’ve missed the unsubtle subtext. There are very vocal segments of Generations Y and Z that are simply done listening to and taking advice from people born before 1965. Whether that stance is justifiable or not, you can’t deny that it’s a barrier to building trust.

I’m not suggesting more experienced advisers take on younger partners simply for the optics or even solely in the hope of attracting younger clients. There is very sound research that points at the meaningful benefits of generationally diverse financial adviser teams for clients of all ages.

A 2009 Harvard University study looked at the effect of aging on financial decision-making. It found that experiential capital – what we commonly think of as wisdom — accumulates throughout life in the absence of some degenerative impairment. Meanwhile, analytic capital — our ability to assimilate new information and make real-time decisions – generally declines as we age. When you think about the knowledge and experience required for successful financial planning and the advantage of raw processing power in effective investing, there is clear value to our clients in both types of cognitive capital. Intergenerational partnerships can offer the best of both worlds.

A Seismic Demographic Shift

Robert W. Baird & Co. – a firm I came out of retirement to join in 2018 – has been preparing for this seismic demographic shift for some time and has developed a unique approach to recruiting and developing next-gen talent.  

Launched in 2012, the Financial Advisor Foundations Program is designed to identify next-gen talent with an interest in financial services and a genuine desire to help people. After starting with just one test subject, the program has grown selectively. Those accepted participate in a competitive and rigorous two-year rotational program that provides real work experience and educational opportunities – in wealth management offices and support areas – to give them a full understanding of all they’ll need to succeed as an adviser.

The goal, says Katie Jackson, Baird’s Next Generation Talent Manager, is to place graduates on teams with seasoned advisors – but it’s not just handed to them. “Expectations are high,” she explained. “As part of the program, candidates not only need to understand how holistic wealth management works but also what their specific value proposition would be to an established team. They have to demonstrate why they’re worth the investment.”

So far, the program has successfully trained and placed 26 next-gen financial advisers with established teams throughout Baird’s branch network. I’m confident Baird’s efforts on this front will position us competitively for the future of our industry.

What’s the plan for your practice?

John Taft is vice chairman of and former chairman of the Securities Industry and Financial Markets Association.

Written by Investors Wallets

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