A new breed of young financial advisor is redefining and reshaping the profession that has been popularly called "stockbroker" ever since a group of Wall Street businessmen began trading securities 200-plus years ago.
To be sure, social and historical events—especially the financial crisis—have played a major role in what has become, increasingly, a shift from broker to advice giver.
Indeed, today's next-gen FAs come equipped with an eagerness to develop and maintain client relationships. Further, they're keenly aware of the importance of empathy to foster bonds and know that trust-building is crucial. Notably, these men and women are not "salespeople"; "financial coach" more accurately describes them.
To compete with older-generation FAs and online do-it-yourself services, next-gen FAs are striving to acquire know-how and certifications to help market themselves as professionals in specialized areas, such as divorce or LGBT issues.
Certainly the use of technology, whether to facilitate and enhance client relationships or boost practice efficiency, is second nature to younger advisors, as well as with their young prospects—those with whom they hope to form sticky, long-term ties.
The need for new advisors is critical: FAs' average age is 50.9, and more than 42% of all FAs are over 55. Hence, the arena is fast losing advisors to retirement—a third of them plan to exit within 10 years—or death.
Research recently interviewed four accomplished next-gen advisors, all based in the "alpha world city" of Los Angeles, the nation's second-biggest metro area.
Here is some of what we learned about this quartet of up-and-comers:
Dimitry Farberov
Financial consultant; Comerica Wealth Management*; B.A., University of California, Los Angeles 2006
A 29-year-old who has no time for advisors whom he labels "sales guys," Dimitry Farberov left the industry for 18 months because he disliked what he witnessed at his former firm.
"My disaffection with the transactional way advisors dealt with clients to make commissions and then essentially kicking them to the curb and never being there to serve their needs again really turned me off. It didn't fit what I was looking to build as an advisor," Farberov says.
At Comerica, he cultivates client relationships and, as part of a team of specialists, educates high-net-worth individuals on the crucial importance of retirement planning.
In a two-year training program, Farberov, who is pursuing CFA accreditation, has already spread his wings, regularly traveling a wide swath to 25 bank branches in LA and beyond to meet with clients and help change their mindset from short- to long-term investing.
Clicking with clients is key, he says. "Most firms offer the same investment management services for more or less the same costs. So it always comes down to relationships," he says. "That's the highest value we can provide."
His target niche: helping non-profit organizations start or develop endowments.
"Young advisors are coming into a world where the value they can produce on a short-term level is very limited because of the access people have to low-cost or free investment options," the FA notes. "Whereas retiring advisors were able to make money off a combination of short-term transactional business and accumulating assets over time, that's effectively impossible for the young advisor today."
Born in the East European country of Belarus, a grandson of Holocaust survivors, Farberov's personal financial objective is "to not rely upon other people and companies to survive."
He nourishes his entrepreneurial side by pursuing startup* ventures, one to provide lower-cost, or even free, Jewish education; the other, an online social platform to help busy moms keep physically and financially fit.
In a support job at Wachovia Securities during the financial crisis, Farberov found himself on the receiving end of panicky phone calls from clients who had lost as much as 40% to 60% of their assets in a month.
"They were looking to their advisors for help; but their advisors had already made their commissions and weren't interested, or didn't have the knowledge of how to deal with the situation," he says. "It was a very shocking time. It changed my outlook: not to be a sales person but to be a relationship manager—a financial psychologist of sorts and to approach investing from a long-term perspective. It taught me to take advantage of opportunities in market [downturns], not to run from them."
* – Editor's Note: After publication of this article, Dimitry Farberov requested it be noted that he is a financial consultant with Comerica Securities, Inc. (Research magazine identified his employer as Comerica Wealth Management.) Secondly, Farberov wished to clarify that the startup ventures mentioned in this article are under consideration, rather than active enterprises.
Sean D. Muhlstein
Financial advisor/assistant vice president-investments; Wells Fargo Advisors (Wealth Brokerage Service); B.A., University of California-Berkeley 2004*; CFP
Graying hair and balding pate—signs of aging but also comforting cues that, to prospective clients, signal experience.
"I didn't have gray hair or lack of hair when I started out, so I had to compensate for my youth by acquiring knowledge and designations—knowing my business inside out," says Sean Muhlstein, 32, based in a bank branch. Early on, he earned the CFP and accredited domestic partnership advisor (ADPA) designations.
The tack worked: In the midst of the financial meltdown and shortly thereafter, Muhlstein built a $30 million book.
"A lot of people were bank clients [at Wells Fargo predecessor Wachovia] with investment accounts elsewhere that were hemorrhaging value. They wanted to stop the bleeding," recalls Muhlstein. He stepped in. "It was a slow and steady process, with a lot of very low volatility, unsexy investments and a lot of long-term trust-building."
His clients range widely in age from 19 to 92. After covering branches in Brentwood, Malibu, Santa Monica and West Hollywood, Muhlstein has now settled into one in the populous Pico-Robertson neighborhood.
Lots of young prospects live there, but it is a demographic that has its challenges. Generation X and the millennials are wary of putting their money into others' hands—and the option of Web-based do-it-yourself investing beckons.
"People in their 20s and 30s are terrified of institutions. There's a lot of distrust of the system and a sense of: 'I can't rely on anyone else,'" he says. "Five years out from the financial crisis, there's still a wall of suspicion that you need to work through to build trust."
Muhlstein does that by assuming the role of client CFO. "Advisors are no longer the gatekeepers of information because people can do their own buying and trading. So it's not, 'Hey, I can make you 6% a year' and then show them a couple of mutual funds. It's goal-planning-based and about the intentions of the money," says the FA.
Born in an LA suburb, Northridge, Muhlstein spent a year at an Israeli university, Bar-Ilan, before enrolling at the University of California, Berkeley, where he majored in liberal arts. After graduation, he worked in the movie industry for a while but, disenchanted, decided that financial services would be more to his liking.
When the meltdown came, he'd been at Wachovia for two years. "I realized how much of the job is about being clients' financial therapist, talking to them through their fears and anxieties and," he says, "also trying to provide solutions and ways to reduce those fears."
