The Y factor

With the average age of Canada’s advisor community hovering around the 50 mark, that workforce realistically has about 15 years before it starts to deplete, potentially leaving older clients advisorless.

To remedy this, firms are increasingly looking to Generation Y — those under the age of 30 — to repopulate the ranks. But three decades of evolution in advising has created tremendous barriers to entry. Youngsters entering the industry have to be both soothsayers and financial whizzes.

It used to be you could start out with one talent or the other, and develop your skills along the way. With ingenuity and tireless work ethic, the late, great Ben Feldman, a high school dropout from East Liverpool, Ohio, rose to become one of the greatest insurance salesmen the industry has ever known. But Feldman, who was known for saying, “the key to a sale is an interview,” would be hard pressed to keep his resume out of the waste basket were he entering the business today.

For the past 30 years, the industry has been able to rely on a workforce trained primarily in the sales culture, and subsequently attaining appropriate technical education mid-career to keep up with the shift from selling product to creating financial plans.

To mold a multi-talented set of recruits, firms have had to abandon the frying pan-into-the-fire model and instead find ways to ease advisors into their careers. Still, handholding can only go so far and the crack in the door that firms have opened up after years of slashing and burning their career sales programs has created an opportunity for a new generation of advisors to enter the business.

This new breed is, generally speaking, well educated, motivated, talented, and in some cases not only poised to take over the clients of soon-to-retire advisors, but in many instances already building their own substantial books of business.

Despite all the talk of wireless technology, Web 2.0 prospecting and the eventual end of human contact, success for these young guns comes very much the same way it did for their forbearers: They have to put their noses to the grindstone and get out to meet people.

Eva Froese, a 26-year-old advisor with RBC Wealth Management is a case in point. Froese is building her business the way many of her predecessors did three decades ago — door to door. She spends a good part of her day in the snowy plains of Manitoba’s Pembina Valley and has put more than 150,000 kilometers on the used Oldsmobile she bought three years ago to meet with her primarily rural client base.

Much of her success has come from lacing up her boots and working harder than anybody else in the communities she serves where she’s simply known as “Eva from RBC,” a terrific boon in the small farming communities of places like Somerset and Crystal City, where reputation is everything. All that travelling makes for long days, since she’s balancing her burgeoning career while going back to school to complete an undergraduate commerce degree with hopes of eventually obtaining an MBA.

Prospecting is mostly done at the kitchen tables of farmers looking to tap into the significant wealth tied into operations that have taken generations to build. She’ll mix the old with the new, often teleconferencing with regional experts and using email to keep in touch with clients. “This business is still about face-to-face contact. If I don’t have a relationship with them and I don’t understand their values there’s no way I can do a good financial plan,” she says.

Rosy Sandhu is similarly young, motivated, and personable, and completed a post-graduate degree in financial planning that will eventually earn her the CFP, before even entering the business. Recruiters were falling over themselves to hire her.

After interviewing with four potentials, 28-year-old Sandhu chose to settle in with Edward Jones in her hometown of Brampton, Ont. She chose Edward Jones because it offered her a base salary, comprehensive training and a support system to help her through the lean early years of building a client base.

In fewer than 10 months on the job, she already has more than 200 clients. These clients didn’t just show up — well technically some did; around 50 were handed to her by an older advisor who no longer had the capacity to serve them. The rest came from Sandhu’s networking and prospecting. She’s knocked on more than 1,000 doors in underserved parts of Brampton’s South East Asian community.

As Yon Kim, the head of recruitment for Edward Jones Canada, points out, there aren’t a lot of people, particularly those with multiple degrees, who want to put in that kind of work. “A lot of young people want to see success come immediately. They graduate and assume they’ll be a vice president running their own department at a certain age,” he says. “They are essentially running their own businesses and just like any new small business it takes three to five years [to get established].”

Jonathan Rivard, 28, another Edward Jones advisor based in Richmond Hill, Ont., is already a five-year veteran. He says hard work is imperative — with no experience or long-term track record, all you have to differentiate yourself from more seasoned advisors is the amount of work you’re willing to put in and earn the trust of prospects.

“I think as a young advisor you can demonstrate enthusiasm, commitment and energy. If you’ve got the knowledge, and you’re going to be loyal to those clients, that will stand out,” he says.

Prospecting

Across the board, prospecting remains the single biggest challenge for young advisors, and it’s not just the time and effort necessary to effectively prospect. Age itself is a significant barrier for the Gen-Yers. In order to survive they have to pursue the same older clientele that seasoned advisors also covet.

Many firms tout the use of new talent to cultivate the future wealth of young prospects. Rivard says a young advisor can’t sustain a practice by serving younger clients exclusively. Podcasts, blogging, email and Ipods are fun gadgets, and many older clients use them, but they pale in comparison to the phone and face-to-face contact, Rivard notes.

“I would say more than 65% of my clients are over the age of 60,” he says. “When I was 23, I started going after younger clients because I related to them. These people have large mortgages, they’ve got kids on the way and they don’t have money to invest. But I realized very quickly I needed to change my clients and go after ones that had money available.”

Rivard admits it’s been hard not only to gain the confidence of his older clients, but also attain the respect of other professionals, such as lawyers and accountants who play important roles in the financial spheres of his clientele. “These are key people you begin to rely on for new business and need to gain traction with as referral centres,” he says. “It’s a challenge young advisors need to deal with very quickly or they won’t survive.”

Kim adds this is the biggest turn-off for new recruits. There are a lot of young advisors with terrific educational backgrounds but they’re terrified about dealing with older and established clients. “They have a great degree, graduate from a great school, and here they are, a 23- to 25- year-old, trying to tell a 55-year-old couple how to manage their finances,” he says.

But, Sandhu says once trust is established, her relationship with older clients is just as easy as it is with other demographics. It’s gaining the trust that’s the challenge. “You’re not always going to get clients to trust you right away. Especially the older ones, when they do look at you, you can tell they feel you’re a bit young,” she says.

In one sense, she had an upper hand with this group since she was able to leverage the reputation of her father, a long-time business owner in the tight-knit community she serves. “He’s got a client base of thousands,” she says. “He’s built this trust up [over 30 years] within the community and people find out that his daughter is doing financial services, it’s broken a barrier for me right off the bat. They’re already comfortable because they know whose daughter I am.”

Sandhu assures her clients she’s in it for the long haul, and will see them well into retirement — although not at the sacrifice of having a family. She’s doing both. Sandhu’s expecting a child later this year, and her firm has created an entire transition program, where a temporary advisor will serve the immediate needs of her clients. Further, Edward Jones has made it clear they want Sandhu back, so when she returns from maternity leave, her office and more importantly her clients will be there waiting for her.

If prospecting is the major hitch to a bright young advisor building a practice, Kim says his firm will do what it can to prevent a talented person from floundering. In some cases, introductions between younger and established advisors are set up in the hopes a succession plan can be built. Daniel Zinn, a 25-year-old advisor based out of Langley British Columbia is the benefactor of one such pairing.

With an applied science background and an enthusiasm for finance, Zinn has the technical acumen to do a good job for his clients, but the prospecting is something he has found difficult in his first year on the job. Without the first-year salary his firm provides, he probably wouldn’t have survived the business.

“The technical part is easy. It’s more fun than work for me. It’s the sales stuff that I found difficult, I didn’t want to be a salesman,” he says. “It’s no secret, with the level of education I have I could be making more for the first, two or three years.”

Fortunately for Zinn, his planning skills were recognized by a successful retiring advisor, who has mentored him and transitioned his client base of more than 400 to Zinn. “It gave him the chance to introduce his clients to me. It was lot better for building trust,” he says.

If firms can’t find a salesperson and technician rolled into one, they choose to have a pair work in tandem. This has been the approach at RBC Wealth Management. From its bank branch network to the affluent clientele served at RBC Dominion Securities, the firm has been establishing itself as a collaborative planning environment. People with sales skills focus on sales, planners plan, and they all have access to more than 75 lawyers and accountants, not to mention the countless analysts, employed by the company, who are able to consult.

After being a cage-worker in high school, inputting client orders with the former national brokerage powerhouse Midland Walwyn, Brian Medd knew he wanted to be a broker or advisor. After university he entered the business in 2004 at Edward Jones and quickly departed to become a bank branch advisor — an IRP — with RBC.

One appeal of his role is he can pretty much just focus on planning, because the clients get brought to him through the branch or prospected by another. “I’ve had a fair amount of clients come from outside the RBC branch. Usually they’re prospected by my colleague, whose only job is to prospect for non-RBC clients,” he says. “When she finds suitable prospects, we usually go and talk to clients together.”

RBC’s team approach is appealing to a lot of younger advisors who don’t want to start out alone. It boosts their confidence when pitching a plan to clients. If there’s a high-net- worth prospect with complex planning needs, the London, Ont.-based financial planning team can call in consultation with a range of lawyers, accountants or even a more experienced regional financial planning consultant. Medd says all of this establishes the vital trust factor.

“We spend a lot of our days talking to our regional financial planning consultant. She’s got her MBA and CFP and is a chartered accountant. I always feel we can provide realistic and attainable advice to our clients,” he says.

Finding the hook

Targeting a specific clientele is usually at the heart of any long-term successful business model. For instance, Ben Feldman built the foundation of his $100 million dollar-a-year business targeting owners of small industrial businesses in eastern Ohio and western Pennsylvania.

Advisors need a hook that separates them from other advisors. Youth is one hook that’s the backbone of Rivard’s business. As Rivard mentioned, he couldn’t make a go of it selling to younger clients, but with a 30-year time horizon in the business, he eventually needs the younger clients to be there in the later stages of his career.

He decided to target their parents instead as an in to create an intergenerational wealth planning business. Eventually the wealth of his mainly retired client base will transfer to their children, and he pledges to be in the business long enough to oversee the entire shift. He even sets up a product structure, such as using primarily no-load products as a means to let clients know he’s committed to growing their assets over 30 years and isn’t interested in quick sales commissions.

“Now that I’ve had three- or four-year relationships with the parents, I’m asking them, ‘if over the holidays your kids are complaining about the performance of their RRSPs and they haven’t heard from their financial advisor, and if you’re happy with me and my assistant here, I would like the opportunity to meet them,’ ” he says.

Froese’s business is almost exclusively targeted at farmer succession planning. It’s an extremely complicated area since wealth is tied up in the land. Taxes, succession planning, valuation and most importantly emotion all come heavily into play. Froese says she’s had to become an expert in all those areas.

“The entire Pembina Valley area I serve is a farming community,” she says. “It used to be you would hand it down to the next generation, but farms have gotten so big it’s just not feasible to do that.”

Froese says as a young person, she’s had to demonstrate her expertise, so prospects know she’s a professional, and she uses the extended network of expertise at RBC quite often, pledging that while she may not know all the answers, she can guarantee to clients that she’ll find them.

“I have a fantastic mentor, good friend, who’s a farm planning expert and she’s helped me get into the financial planning business,” she says. “If I’m not sure how to handle [something], I’m able to conference call her into an appointment or sometimes I’ll call a tax planning expert or more senior financial planning person.

Her reputation has reached the point where Froese is now able to give her car a much-needed break. She’s moved into hosting farm succession planning seminars, one of which was recently attended by more than 100 people. She believes what sets her apart from other prospectors at these seminars is not how she manages the financial issues, but how she relates to the emotional state of clients.

“I’ve been working with one particular client for the last year and half and he’s ready to let go of the farm and hand it over to the third party. He’s not handing it over to the next generation. It really is like losing a loved one. You go through the whole grieving process. Some days he’s so upset and panicking and other days he’s ready to let go, the next day he’s nervous and apprehensive,” she says.

“I’ve worked hard to build a relationship of trust with him. After every conversation he reminds me I should get a psychology degree.”

Somewhere, Ben Feldman is probably smiling.

(02/02/09)

Mark Noble