Over the next 20 years, an estimated $70 trillion is
expected to change hands from baby boomers to millennials in the largest wealth
transfer in history. As this shift will undoubtedly reshape the investing
landscape and redefine what an average investor looks like, now is the time to
prepare the next generation of financial advisors for the Great Wealth
Transfer.
Millennials are currently 25 to 40 years old, meaning many
have just entered a phase in life where they are buying their first homes.
Concurrently, they are entering a phase where they will make substantial
savings, such as education, to grow their families, and of course for
retirement.
The challenge facing many in this generation is that they
are relative newcomers to market dynamics. Many savers and investors have been
doing so on their own, without having sought experience from tenured financial
advisors.
As a parent of a millennial, I recognize I have not properly
prepared my own children with either basic or sophisticated goals-based
investment strategies. My daughter has shared that many in her generation lack
experience investing their own money and understanding what market shifts mean
for their wallets.
For many that are also in my situation, I worry the next generation
is not properly equipped with the knowledge or tools to manage their family’s
finances, should that responsibility transition to them sooner than expected.
However, ensuring the wealth transition from older to
younger generations happens smoothly is not just a family issue. Many will
suggest that the burden falls on financial advisors as well, as they are tasked
with understanding their clients’ needs and ensuring their financial stability
in the long run.
But this is far from a burden; this is a considerable
opportunity to manage an important transition of wealth and grow a sustainable
business for a new generation of financial advisors.
With the integral role advisors have in passing the baton to
young investors, it’s important now more than ever that advisory firms ensure
their advisors are well equipped to support the new client base. Here’s how
advisory firms can best prepare the next generation of financial advisors for
the Great Wealth Transfer:
1. Lean on younger advisors and their experiences.
Advisors who can relate to their clients with shared common
experiences are more likely to gain their trust and understanding. Therefore,
as millennials slowly but surely emerge as the dominant consumer group, it is
critical that advisory firms hire financial professionals who come from a
similar age group.
Generational cohorts have shared experiences and
understandings that are irreplaceable. That’s why it is critical that we make
this industry more attractive for those starting their careers and teach them
the skills they need to provide advice to their peers.
Advisors who will have the most success with millennial
clients are likely to be those that are younger, tech savvy, and have similar
interests. Ultimately, having more diversity of thought by bringing in younger
advisors will prove fruitful in the long run as they will in turn attract
younger clientele.
2. Teach advisors how to listen.
Once advisory firms have hired younger advisors to reflect their
increasingly younger clientele, they must properly train new advisors on the
lay of the land and set them up for success.
With over three decades in this business, I am aware of the
increased focus on investment training. It is critically important to
understand markets and how investments interact to deliver a successful
long-term investment experience, but we can’t forget what I think is the most
important act: listening.
Clients aren’t looking for robots crunching numbers, but
instead, empathetic and relatable financial advisors who they can build trust
and a sense of mutual understanding with. I learned this valuable lesson during
my first sales training and haven’t forgotten it since.
I spent hours practicing, listening to what someone would
say, and then repeating it back to them using their words to make sure I heard
them correctly. By confirming what I understood to be the most important goals
to my clients, I was able to successfully determine what they were trying to
achieve with their money.
This lesson still holds true today. I was recently at a
forum where a panel of investors who have experience working with financial
advisors were asked whether they’ve changed advisors before, and if so why. The
answer was always the same; they didn’t feel their advisors truly understood
their goals and investment needs.
This is an avoidable issue. Before teaching young
professionals how to define products to clients or provide advice to investors,
we need to teach them how to listen and show emotional ownership and
responsibility towards their clients’ needs and wants. Most importantly, we
need to help our clients make better financial decisions.
Financial advisors have a greater purpose beyond raising
assets; it’s about helping people define the purpose of their money, and then
make better portfolio and planning decisions that result in aligning the best
financial instruments to achieve their goals. How would we achieve this without
truly understanding what our clients are looking for?
3. Attract and prepare the next generation of advisors
via hands-on programs.
To best prepare our industry, we must identify and build the
next generation of financial advisors from early on. I urge my peers to join me
in advocating for implementing and strengthening programs that are geared
towards training up-and-coming advisors – including those currently in high
school and higher education institutions.
Educational programs will provide valuable hands-on,
real-world opportunities to aspiring financial advisors through internships and
work-study programs. A notable example is the FinServ Foundation, which offers
a training program for college seniors who want to enter the finance industry.
Through coaching, mentorship and networking opportunities,
this program provides students with tangible opportunities to truly understand
the core of the business, and I’m proud to have played a small part in the
development of this program.
4. Consider more ways to help our industry help our
clients.
The shifting dynamic of our society’s wealth and the growing
influence of the millennial generation both provide a huge opportunity and a
challenge for the financial services industry. To help investors achieve a
healthy financial future, the first step is to ensure financial advisors are
equipped to properly advise and partner with them.
We must remember advisors’ responsibilities start even
before the first client meeting. New and experienced advisors alike must build
a solid foundation — through constant education, training, and diversification
of the field — to prepare for the future of our business.
Click here for the
original article.