The wealth management industry is experiencing a human capital crisis. On the one hand you have a graying population of financial advisors; the average age of today's advisor is in the low-to-mid fifties. On the other hand, a majority of them do not have a succession plan.

That's created a sense of urgency at their employers to put these plans in place. Yet despite the push, many advisors, sometimes passively and in some cases quite actively, resist drawing up a formal transition plan for their practice.

When it comes to succession, there are actually two issues to be resolved. The first is getting past senior advisors' reluctance to move on to the next phase of their professional career and turn over their practice to a younger advisor. To do this, however, they need to have someone to turn it over to, and an equally daunting problem for the wealth management industry is the dearth of younger advisors qualified to succeed these seasoned veterans. The critical question becomes how do you appeal to talented young people and draw them into the profession?

Knowledge and Integrity
Understanding the qualities that will lead to success is essential to attract the right talent. There are two skill-sets needed to excel as a financial advisor. First, an outstanding advisor must possess the knowledge and technical expertise needed to make financially sound decisions on behalf of his or her clients. Financial acumen alone, though, is not sufficient. It is just as important for the individual to possess a high level of integrity along with a justifiable sense of self-confidence. It is qualities like these that allow clients to feel comfortable entrusting their money and well-being to an advisor.

The good news is that these behavioral skills can be learned. But it takes tremendous passion for someone to be willing to undertake the hard work required to become both competent and confident in this industry.

That raises two more questions: "How can you share your passion for your work with members of a younger generation to encourage them to become a financial advisor?" and as importantly, "What are you willing to do to ensure their success?" It takes vision, generosity and patience on the part of an advisor to be willing to mentor someone and prepare them to be successful in this business.

While clearly a complex process, the essential factors needed to engage younger people in the industry are twofold: an understanding of the generational differences in work values and style, along with a willingness to adopt a synergistic team approach that allows for inclusiveness along with individual growth and development.

Generational Differences
The biggest obstacle to baby boomer advisors working with members of the X and Y generations is a misunderstanding of the goals, values and work ethics of the individuals in this age group. It is important to keep in mind that each generation is shaped by uniquely different cultural, political and economic conditions, resulting in varied approaches to dealing with the world. Understanding the many differences can help bridge the communication gap between generations.

In previous articles I articulated three things to consider in working more effectively with someone younger. First, you must understand that younger generations crave meaning in their work but require different communication from boomers. It is not enough to explain the what and how of a choice — you must show them the why by clearly communicating the meaning behind it.

Next, you must not misinterpret their wanting to work smarter, not harder, as an indication that they don't care about their work. Generations X and Y not only multi-task better, but tend to focus on work-life balance and having fun. This can often appear to be at odds with the values and perspective of boomers. It's important not to judge them, but rather adopt a "learner" attitude. The key is asking relevant questions to understand their beliefs and what motivates them.

Finally, incorporating the latest wave of technology into your practice is essential. The technology we now have at our fingertips allows us to work far more efficiently, but also differently. Becoming comfortable with and incorporating Skype, Face Time, social media, mobile devices such as iPads, webcasts, podcasts and online tutorials into your practice is a pivotal ingredient to working successfully with millenials.

For a successful transition, it is also important to identify individuals whose attitude and skills are aligned with the goals and values of your practice. Likewise, you need to create an organizational environment that will foster the growth and development of the individuals on that team. The key to being an effective business leader is to understand what are those critical elements that forge a great team and drive results.

The Right Team
Consider the following five "people" factors, which differentiate great teams:

Trust: Team members need to know they can count on each other to get the job done and that if challenges crop up, they will have each other's backs.

Respect: Team members must have self-respect, as well as mutual respect for their fellow team members' abilities.

Communication: Team members must have both the skills and means to communicate openly and honestly with each other.

Passion: Each team member must be driven to accomplish the team's mutual goals.

Commitment: All team members must share the same values, including completing projects with the highest possible level of execution.

The Right Structure
Finally, once you assemble a team with the right group of people, you need to create an organizational structure that allows the team members to pursue their individual and collective goals successfully. Researchers and practitioners have identified six factors that are conducive to high degrees of team success. They are:

  • A clear set of both common and individual objectives;
  • Metrics that allow team members to assess their ongoing collective and individual performance;
  • Training for team members and the team as a whole;
  • Decision-making authority as it pertains to achieving specific goals;
  • Team-based rewards and evaluations, as opposed to individual performance incentives; and
  • An open culture, where communication and differing perspectives are encouraged and rewarded.

Finding and recruiting young people with a passion for the financial advisor profession is the first step toward creating an effective transition plan and ensuring the future of your business. By making the effort to identify appropriate candidates, and pledging to guide them through the succession process, you are not only fulfilling a commitment to your clients and their families, but also contributing to the revitalization of the financial services industry, as it moves to the next stage in its own change management process.
Denise P. Federer, Ph.D., is a clinical psychologist, executive coach and founder of Federer Performance Management Group. She has been a consultant to the financial services industry for 20 years.


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