The Fast Track

I’ve received a number of e-mails about my May column “Coming of Age” in which I pointed out that the recent economic downturn has flip-flopped the job market for young financial planners: Instead of a “seller’s market” where they had many job offers and commanded high compensation packages, we now have a “buyers” market, in which a limited number of job opportunities put potential employers in the proverbial driver’s seat.

Many of the e-mails ask the same question: Since the down markets affect firm economics, too, how do advisors decide when is the right time to hire a new advisor?

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In my work with advisory practices, I get to see all the myriad things that custodians and broker/dealers do to “help” their advisors manage and market their firms more successfully. Often, my exposure is the context of helping advisors decipher some data dump of information intended to be “useful,” understand how a conference speaker’s comments might be translated into constructive actions, or apply some bit of generic advice to fit the specifics of an individual practice.

These days, however, I’m also aware of how these strategic partners are cutting back on the help they provide independent advisors.
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These days, new sources of revenues are on the minds of many advisors. And that means signing up new clients. Fortunately (or unfortunately), with investment returns falling far short of what many folks were led to expect, there are plenty of potential clients looking for a new advisor.  The question is: how can you increase your chances that they’ll look in your direction?
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General George Patton once said that “in combat, there aren’t nearly as many fatigued divisions as there are fatigued divisional commanders.” During a crisis, people in responsible positions tend to over work themselves, and the problem is that you can’t help anyone if you don’t take care of yourself first. That goes double for financial advisors during down markets like this one.
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One of the tangential issues from this fall’s market meltdown that independent advisors are wrestling with is year-end bonuses. With revenues and profits way off last year’s numbers or this year’s projections, many advisors are finding their bonus pools substantially lacking. That presents some hard choices for advisors who want to be fair to their employees.
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With your practice revenues down and your workload—from increased client contact and possibly a few new clients—up, I realize that reviewing your own financial plan probably isn’t high on your priority list right now. But it should be. My advice to my clients and to you is to take a page out of Nike’s book and “just do it.”

With practice revenues down, chances are your own pension/SEP/KEOGH/IRA/401(k)/Cayman account is going to be, or is already, underfunded. And if selling your practice was part of your retirement funding, it’s probably worth less than you projected, too. So you just have to bite the bullet, and do for yourself what you’re doing or will be doing with many of your clients: Considering your options and coming up with a new plan.
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Tough times like these can also be the best time for well-positioned advisory firms to grow. With the fate of many wirehouses uncertain, and the markets falling, if the past is any indication, new clients will be turning to independent advisors to get a better handle on their personal finances.

To deal with these new clients, or just to better position their practices for growth, some advisors will be looking to hire a young financial planner or two to help them. The good news is that their timing couldn’t be better: with many advisory firms wrestling with declining revenues and consequently curtailing their own hiring plans, the market for young professional talent is very good right now. But be careful—there are just as many pitfalls today as there are during the boom times.
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I just got back from the FPA NexGen conference at St. John’s College outside of Minneapolis and it was great. I couldn’t get over how different it was—and better—than the last one I attended two years ago. Mark Tibergien and Dick Wagner gave speeches, and moderated panels; both were great, but the rest of the conference was essentially conducted by NexGeners themselves. In fact, in contrast to years past, very few non-NexGen advisors showed up at all. Not that there’s anything wrong with “older” advisors (some of my best friends…), but there’s something about having a conference for NexGen advisors, by NexGen advisors that really worked. Not only for me, but my sense was it worked for the other attendees, as well.

I think the NexGen conference really fills a need in the advisory industry.

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I usually don’t comment on advisor politics or regulation. For one thing, it rarely impacts practice management, and frankly, I just don’t have the time to think about it. And there are plenty of folks who regularly cover that beat. But the CFP Board has the advisors I talk to so worked up these days, I feel obligated to make a few observations.
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I recently got an e-mail from a reader that warrants further comment. Apparently, he took issue with a small comment in my April column about how advisors can prosper in the current bear market. I’ll let him speak for himself: “I was rather shocked and dismayed to read the leader on the Fast Track column… I’m not sure what you were alluding to with your “Bush Bull Market” comment. Maybe and hopefully it was a satirical spin on the current administration’s insane economic and foreign policies that are leading this country into the worst economic crisis this country has seen since the Great Depression.”

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