If you’ve been around in this industry, you’ve likely heard about the crisis that’s upon us: the increasing demand for financial advice, and the shortage of young, quality talent to deliver that advice. Instead of harvesting new talent, many firms are re-recruiting from the same pool of aging advisors, spending more on recruiting packages that’s preventing them from investing in training programs, said Kim Dellarocca, head of practice management and director of segment marketing at Pershing.
But recruiting young people into this industry is not as easy as it sounds. There’s an 11-year “readiness gap,” the time it takes to bring on an advisor new to the industry and get them ready to take over the business, Dellarocca said.
Millennials are the answer to the crisis, Pershing argued this morning at a media roundtable discussion. But in order to recruit this new talent, it’s key to understand the generational differences, said Cathy Benko, vice chairman and managing principal at Deloitte. When you compare Gen Y to Gen X, they have the same intrinsic values, but they manifest those values very differently.
Generation Yers, for example, do want to be loyal to their employers, with 54 percent of them saying they don’t want to ‘job hop,’ but their loyalty is to their front-line managers, not the institution itself, Benko said. Managers don’t just automatically get that loyalty; they have to earn the young person’s respect. But once it’s there, it’s fierce.
Also interesting, eight out of 10 Millennials say they are loyal to their employers, yet only one out of 100 human resources professionals say they’re loyal. “There’s something in that,” Benko said.
Millennials are looking to achieve and work hard, but employability is key. Thirty-seven percent of 18 to 29-year-olds have been unemployed, Benko said.
Whereas Gen X is used to entitlement, where the stock markets are up and there’s economic confidence, Generation Y is coming from a broken chain of tradition, added Craig Pfeiffer, founder and CEO of Advisors Ahead. Gen Yers don’t think they’ll get anything for free; instead, they know they’ll have to earn it. And when you put financial services into the context of its social impact, they start to embrace financial services.
The younger generation wants approval, but they don’t look towards elders and institutions for it, Benko said. Instead, they want approval from each other. The same goes for trust: They get their trusted sources from the people around them. According to Benko, Gen Y believes 14 percent of advertising, yet they believe 72 percent of what their peers say.
The old way of recruiting into this industry has been a “sink or swim” model, where new advisors just learned by mistake, Pfeiffer said. Wealth management has typically thought of human capital as an expense, not an investment. A better model, he said, is a “learn by success” model, where new advisors learn by watching successful FAs.
Pfeiffer calls for an embedded program that provides practical application to new people coming into the industry—an internship/resident model, in other words. He recommends and internship of between three to five years, but most firms don’t have the patience for that. A one to two-year program is probably more practical, he said.