The Fast Track

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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Just when it looked like the stock market might be turning the corner, oil prices spiked, throwing airlines and many other sectors into a tailspin again. But as I’ve been saying for the past few months, down markets are the time when successful independent advisory firms hit their highest growth rates, in terms of new clients, and often even assets under management. It sure looks like those “good times” will continue to roll for some time to come.

Of course, all firms don’t grow during such tough times: some actually lose clients, but more often, advisors just don’t add many new ones, while their existing AUM fall with the bear markets, taking firm revenues with them. If your practice falls into one of these categories, in which your new client growth hasn’t accelerated in the past three months or so, it’s now time to ask yourself why, and get your firm on track to capture your share of breakaway clients.
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I was recently asked to help create a survey for students at Kansas State University, to determine whether they’d be interested in using a financial planning center. It turns out that they would, with over 75% of the responders reporting that they would be likely to do so. Some of their other answers, however, reinforced my own observations that college graduates, even from financial planning organizations, are woefully ignorant about employee compensation and benefits packages. This hole in their education makes it virtually impossible for them to accurately assess a job offer, causing many young financial planners to turn down jobs that they really should have taken.
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As you may know, I’m sympathetic to the challenges facing young professionals in the independent advisory community, in no small part because I’m a young professional, myself (although having just turned 30, I don’t feel quite so young as I used to). As a young consultant to mostly older, successful financial advisors, believe me, I’ve faced more than my share of challenges. Yet I’ve come to realize that we often make things harder for ourselves than they have to be, and that’s at least one problem we can do something about.

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In my experience, working with interns has always been a great idea for established advisors. Not only are you giving back by helping to train the next generation of financial planners, but you get much needed help around the office, and a working update on the latest advances in technology and practice management techniques from someone who’s being trained on the leading edge. What’s more and perhaps most important, you also get a preview of a candidate for a permanent advisory position with your firm. From a recruiting and screening standpoint, I can tell you it doesn’t get any better than getting to know someone and observe how they handle various projects and situations over some months right in your own office.
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In my January 2008 column for Investment Advisor, I write about the increasing challenges of recruiting young professionals in today’s overly seller’s market. I mention that common courtesy—thank you notes, showing up for interviews on time, canceling or rescheduling appointments well before the appointment date, etc.—seems to be a thing of the past for many job applicants today: and I suggest that advisors can use this rudeness to screen out potential employees.

But I don’t think today’s young advisors realize how much damage they could be doing to their careers by exhibiting this high-handed behavior. I understand that experienced young advisors are riding high these days; job offers are pouring in, salaries are skyrocketing, and you feel as if it just can’t get any better than this.

Well, you’re right: it probably can’t get any better. But it can get worse, maybe a lot worse.

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The annual Moss Adams Studies are always revealing, and this year’s recently released Compensation Study was no exception. The pay scale for non-owner professionals is starting to skyrocket, long overdue in my view. According to Moss Adams, compensation for non-owner lead advisors has jumped 41% in the past two years. And I expect we’ll see more of the same in the next several years, at least.

It’s no secret that advisor comp has been driven up recently by increased demand for younger planners: It seems that older owner advisors have realized that they can grow their firms faster with professional leverage—and that good, junior advisors who can eventually take over make their firms much more valuable to prospective buyers.

For some years now, firm owners have been underpaying young professionals, as evidenced by the high turnover rate among NextGen planners, and by the much higher comp that young professionals can command in other professions such as accounting and securities sales. Hopefully, the tide of rising wages will help stop the brain drain of smart young planners leaving the profession.
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My last blog about dressing professionally seems to have struck a chord with many young professionals. Not only have I received a flood of e-mails confirming what took me six years to figure out (that dressing the way your clients or boss or audience expects you to dress will make your job and your life much easier), I also got a number of inquiries about other aspects of professional deportment which directly affect the careers of young advisors.

The most frequent question I got involved drinking in business settings, especially around clients and coworkers. Now, I’m no expert on alcohol-related problems, but let’s just say I have a bit of experience in this area, and have certainly witnessed plenty of do’s and don’ts over the years. Drinking alcohol is certainly a part of many settings in which you’ll find yourself with clients, colleagues, employees, or bosses. Read the rest of this entry »