Just 10 years ago, the goal of most independent advisory firms was to have $100 million in client assets under management. Today, there is a new standard. Many advisors I talk with want to take their businesses to $1 billion in AUM. To get to that level within the lifespans of their current owners, most firms need to greatly accelerate their rate of growth.
As the advisory business is significantly less complex than, say, running Apple or The Vanguard Group, most firms have relatively limited options: either add more clients, capture a greater share of assets of existing clients or both. Because most firms that are interested in growing have long since maximized their share of existing client assets, that leaves only attracting new — and hopefully wealthier — clients.
I know what you're thinking: With a large and growing number of advisory firms trying to add new clients, and a flood of breakaway brokers opening new firms, this won't be easy. And you're right, which is why so many firms these days are focusing on their sales and marketing efforts. Unfortunately, that's not your biggest problem — even if you are able to add significantly more clients, most firms today are running at (or over) maximum working capacity.
Many firms have been looking to hire experienced advisors over the past few years, amid a serious shortage of talented, experienced advisors. In response, many firms have been turning to younger Gen X advisors to create capacity to grow. However, they are finding that many of the advisors in my generation aren't meeting their expectations. The good news is that it's well within the abilities of most firm owners to solve the problem and grow their firms. All you have to do is accelerate your rate of learning.
This article is primarily for owner-advisors who are in the baby boom generation (although I suspect you Gen Xers will enjoy it, too). Take yourselves back to when you started your careers: sometime between 1970 and 1990. Television was all the rage and CNBC was on in every office. Everyone had a telephone — on their desks — and hotshot brokers did business via fax machines. Cutting-edge financial planners calculated client needs with hand-held HP-12c calculators (to be fair, I still use mine), and to learn the business, advisors went to seminars in plush hotels, led by the industry's most successful "big producers" clad in dark blue Armani suits and Italian loafers with $300 haircuts (that was a lot back then).
Now, imagine how you would have felt if your first job was with a firm that didn't have telephones and was communicating with clients and prospects via Western Union telegrams. To get current financial news, you had a radio on your desk, and to run your calculations they gave you a slide rule. For professional education, they sent you to a local Holiday Inn to hear a bearded guy in a frayed black T-shirt, dirty khakis and sneakers (apologies to Bob Veres). I suspect that not only would you have been underwhelmed by your employer, firm "efficiency" would have been an oxymoron. (That means "a contradiction of terms:" I looked it up.)
Today, most of you baby boomers are rapidly approaching retirement age. I know this because I primarily work with you. I also know that a lot of you have spent the past decade or so trying to teach and train the next generation — my Next Geners — to fill your Hush Puppies and take over your clients and your firms. Unfortunately, as far as I can tell, that transition isn't going well. Despite the rather massive efforts of custodians, BDs, industry organizations and boomer advisors themselves, the next generation of advisors isn't learning the business fast enough to fill the looming void.
The Evolution of Education
I know that the prevailing explanation for this looming void is that my generation is made up of a bunch of slackers — and a few us may fit that description. (When I am your age, I may say that about the 8-year-olds running around right now, too.) However, in my experience, the fundamental reason that you can't find younger advisors who are ready to take over your business is that you're trying to teach them the same way you were taught: through networking, study groups, industry conferences, book reading lists and by the example of older advisors. What you don't realize is that educational tools have changed dramatically in the past 20 years.
Today's young advisors have access to an almost unlimited amount of information, anytime, anywhere, via the internet. They attend conferences online, they form study groups on LinkedIn, they train themselves through online videos or gaming, and they network 24/7. If you're not using those channels to reach them, you won't — reach them, that is.
I have been researching this trend over the past six months and in doing so, I have talked to a great number of young advisors about their perspectives of their firms. As you might expect, there is a technology disconnect and it creates a number of problems for the boomer leaders of today's advisory firms:
1. They think you are a caveman or woman.
As you probably would have felt in the above scenario, they won't have much respect for someone or some business that is so far behind the times: you might as well be using stone knives and bearskins. As a result, it will be hard for them to believe that you have anything of value to teach them, and motivation will suffer.
2. They will learn poorly.
Their attention spans are short, they are easily distracted, and are constantly looking for something "more interesting" to focus on. Here's an example: One younger advisor told me his boss recently recommended a book called "Double Double" about key performance indicators. But instead of reading it, he went online and read the reviews and comments about it. When I asked if he'd read it, he said, "I don't need to read the whole book to get the general idea." Then he explained the book's concepts to me, and showed me a spreadsheet that he had created to capture them. It was all right on target. (I actually read the whole book so I can confirm he was right.) The takeaway here is that Gen X advisors have grown up on "The Ten Things to Do Now" articles: They don't have any patience for the extra fluff that most books contain. To teach them, you have to boil down your ideas to the essential points, and give it to them short and sweet.
3. They will turn to the internet.
