Preparing for Next-Gen Advisors and Investors1

PROFILES IN EVOLVING BUSINESS MODELS

Preparing for Next-Gen Advisors and Investors1

A New Approach to Talent for Reaching Next-Gen Investors

Many advisory firms tend to focus on an older and wealthier segment of the market. A ccording to the Fidelity 2016 Financial Advisor Community (FAC) Future-Ready Study,2 74% of participating advisors said that investors 52 years of age or older (baby boomer+ investors), or those with $1 million or more in investable assets, are among their top three client acquisition targets for the next five years. A large number of these baby boomer3 clients, however, are moving from an asset accumulation to an asset distribution stage of their life, which is raising questions about how to replenish this business with Gen X/Y investors.

To help firms explore what these marketplace changes may mean for their businesses, Fidelity spoke to advisors who are taking steps to appeal to this younger audience. This includes initiatives to attract and train younger advisors with similar profiles and preferences who may have an opportunity to establish long-lasting relationships with this segment.

Securities America, Inc. (SAI), is an example of a firm that has launched a program to train and mentor advisors under 40 years of age to specifically serve younger clients. This next-gen group currently represents about 42% of the firm's approximately 2,500 advisor population. Fidelity interviewed Kirk Hulett,4 Executive Vice President of Strategy and Practice Management for SAI, to learn more about the program. Hulett leads a team of business coach consultants who work with SAI's advisors on all aspects of owning and running a business--from planning to marketing to human resources issues.

1Born between 1965 and 1992; also referred to as Gen X/Y. 2The Fidelity 2016 Financial Advisor Community (FAC) Future-Ready Study was an online, blind survey (Fidelity not identified) that was fielded November 23 to December 5, 2016. Participants included 518 advisors who manage or advise upon client assets either individually or as a team, and work primarily with individual investors. Advisor firm types included a mix of banks, independent broker-dealers, insurance companies, regional broker-dealers, RIAs, and national brokerage firms (commonly referred to as wirehouses), with findings weighted to reflect industry composition. The study was conducted by an independent firm not affiliated with Fidelity Investments. 3Born between 1946 and 1964. 4May 8, 2015.

Inside

Respond to the Needs of Next-Gen Advisors

Provide Appropriate Training

Coach and Mentor

Be Relevant for Next-Gen Investors

Considerations for Your Business

About "Profiles in Evolving Business Models"

There are many ways to evolve your business model. Hearing stories of how advisors are working to transform their firms may provide useful insights for others looking to reshape their activities to capitalize on the changing market environment. Fidelity's "Profiles in Evolving Business Models" presents client case studies that feature firms that have initiatives under way to reach new segments of the market or offer a new client experience, providing examples to help others think about what might work for their firms.

About Securities America*

Business: Independent broker-dealer Year Founded: 1984 Headquarters: La Vista, Nebraska Firm Size: Approximately 2,500 affiliated advisors Assets under Advisement (AUA): $70.1B Percentage of Gen X/Y clients: 30% Average Account Size for Gen X/Y: $51K Ownership: A wholly owned subsidiary of Ladenburg Thalmann Financial Services Inc. *As of June 30, 2017; Source: Securities America.

We discovered that there are four main components to the firm's next-gen strategy:

1 RESPOND TO THE NEEDS OF NEXT-GEN ADVISORS5

2 PROVIDE APPROPRIATE TRAINING

3 COACH AND MENTOR

4

OFFER TOOLS TO BE

RELEVANT FOR NEXT-GEN

INVESTORS

5Advisors under 40 years of age, as defined by the independent broker-dealer.

2

1. Respond to the Needs of Next-Gen Advisors

"When thinking about the next-gen investor, we believe there are some stereotypes that, generally, are just not true," says Hulett. "For example, some say these individuals don't have investable assets, aren't willing to pay for advice, and only want to work with a digital advisor. In reality, there is a lot of business opportunity here, and advisors need to engage this group, especially the children of current clients. In our opinion, one of the best ways to do this is to have people working in a practice who look like these investors."

"Working with next-gen advisors and next-gen investors is very important at SAI--it's one of our key strategic business development goals."

--Kirk Hulett

SAI knew it wanted to nurture younger advisors, and in 2014 formed a next-gen advisory council to gather intelligence on how best to serve this segment--what development programs, marketing programs, and technology to provide. The council is currently made up of eight under-40 advisors who meet via conference call every quarter.

The council suggested that SAI create a special next-gen workshop designed to address issues of interest to younger advisors. Held at the firm's national conference, the workshop included presentations by a number of senior advisors. Topics ranged from how to create a fee-based service model to how these senior advisors describe the value they offer relative to the price they charge. Topics also covered succession planning, providing insights on how younger advisors can prepare to take over a practice when an older advisor retires.

"The workshop was so well received, we are now rolling out online forums accessible from our intranet," notes Hulett. "People will be able to post questions and get responses from other nextgen advisors, and upload documents, pictures, and examples--all in a searchable archive. We will also use what has been posted as a form of market research to help us identify areas where we might want to develop additional tools or educational materials."

2. Provide Appropriate Training

SAI created an Associate Advisor Training Program specifically aimed at next-gen advisors. Hulett's team mapped out the critical competencies they felt were needed for success, and then designed a curriculum to address each of these skill sets.

Securities America Associate Advisor Training Program: Five Key Areas

1. Personal productivity

2. Business management

3. Marketing and client acquisition

4. Client advice and delivery

5. Working with your mentor

"The information is delivered through 22 video training modules, with a moderator explaining the concepts," explains Hulett. "They also contain a coach's corner, where one of our senior team members provides a play-by-play review of what was discussed. Each video has homework to reinforce the lessons. For example, under personal productivity, next-gen advisors try to better manage their time and block off hours for high-priority activities, such as prospecting and education. Under client advice and delivery, they craft and present their value proposition, and make a list of useful information to gather when they meet with clients."

"In the end, we want these younger advisors to be purposeful about how they create and run their businesses," says Hulett. "They need a plan for where they want to be longer term, the type of client to focus on, and the services to provide. We also emphasize the importance of continually showing their value in very tangible ways, as that's crucial to maintaining client relationships and getting referrals."

3. Coach and Mentor

SAI believes that one way for an associate advisor to move to the top tier is by shadowing an experienced advisor. So they pair a junior advisor with a senior advisor in a mentoring relationship that complements the training and provides opportunities for wisdom transfer. Every other week for a 12-week period, the senior and junior advisor have a phone call with one of the firm's coaches. The coach's role is to guide the discussion and keep it focused on the core competencies junior advisors need to learn, asking questions and facilitating impromptu role plays along the way.

"Senior advisors who serve as mentors say they see a higher level of confidence and engagement from the junior advisors as a result of the program."

--Kirk Hulett

"We started this approach with four coach-mentor relationships to test things out, and things have gone well," says Hulett. "Two of the four junior participants have already taken the initiative to go and visit the senior advisor--although in-person meetings were never anticipated. One of the visits was to see how the senior advisor conducted client seminars for prospecting and education, and the person came back with a number of ideas to incorporate into his practice. We are now expanding this program and taking it to a broader group."

4. Be Relevant for Next-Gen Investors

SAI believes that the next-gen investor will want to have a relationship with an advisor who incorporates more technology, including online collaboration tools, mobile applications, and real-time access to their accounts. These younger investors also encourage their advisors to be as paperless as possible.

"We also recommend that advisors establish a social media presence with a strong up-to-date profile, because next-gen investors are going to look there to ensure that the advisor is credible," notes Hulett.

3

Sample technology for next-gen advisors and their clients:

eSignature

Online document

storage

Remote check deposit

Account aggregation

software

Social media

"We then recommend that they develop a social media strategy that showcases the value they can bring to a relationship. In our experience, advisors who have been most successful using social media understand their clients' interests and deliver helpful content. Because it's important to maintain an online presence once you start, we develop content for our advisors to use in different online channels, and suggest outside providers of content, too."

"If an advisor wants to have a sustainable business in the long term, he or she needs need to start working with next-gen investors to establish a beachhead."

-- Kirk Hulett

"Advisors have asked us for more ways to have conversations with next-gen investors," explains Hulett. "In response, we have developed a series of marketing tools and client seminars, including ideas to reach a client's children. For example, advisors can invite these children to a session on the 10 biggest financial questions that Gen X/Y investors typically ask. Or, they might suggest that a client make a gift to a child, perhaps using a 529 plan or a Roth contribution, and then meet with the child

to discuss why the gift is important and how they can best use it. We have other programs to support conversations on topics like 401(k) allocations and potential insurance needs."

SAI also provides a diagnostic tool for advisors that enables them to assess revenue by household, assets by age of the client, and other performance predictors. This helps advisors take a close look at the different segments they are serving, and where there may be opportunities to provide specific services. These could include establishing 529 accounts for clients with younger children, or creating an estate plan for clients thinking about transferring wealth to another generation. "It also enables advisors to assess what the inflow of assets might look like a few years out," says Hulett. "They can see where they may be vulnerable because their clients are aging, which underscores the importance of diversifying their book by attracting younger investors."

"The next-gen slice of a book may be less profitable today than other segments, but that slice is going to get better over time, and will be needed to sustain a business longer term."

--Kirk Hulett

4

Considerations for Your Business

There are many ways a firm can potentially evolve its business model to attract a new type of advisor and serve a new type of client. After reading about the initiatives under way at this independent brokerdealer, you may want to think about how your firm is addressing the demographic changes that are taking place and the need to target younger investors for long-term business sustainability. Consider the following questions:

? Do we have a plan for attracting next-gen advisors to our firm and for supporting their professional development?

? What are we doing to develop the younger advisors on staff? Are our coaching, mentoring, and training programs hitting the mark?

? Are we developing a strategy to attract tomorrow's investors, which may include aligning them with next-gen advisors?

? Have we sufficiently evaluated technology solutions that may help us attract tech-savvy advisors and investors?

? Are we able to support advisors in their outreach to younger investors with relevant content, tools, and educational materials?

Moving Forward

SAI has many plans for expanding the initiatives it currently has in place. "We want to be seen as a firm that's friendly for next-gen advisors, and supporting the growth of their businesses," says Hulett. "By embracing the new demographics, SAI and our advisors are going to have sustainable businesses well into the future. We are going to be delivering on our mission to help people live a successful financial life."

As SAI continues to refine its next-gen program, Hulett says the company will likely do back-testing to compare the performance of next-gen advisors who went through the program with those who didn't to help assess the impact. They will also look at who has been on the next-gen advisory council to see if being a member had a positive effect on performance.

5

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download