The RIA industry is only as good as the financial advisors it employs. The future of the business will look different than it does today and firms that remain competitive will focus not only on serving their clients but also supporting the professional development of their employees.
Lisa Salvi, vice president of Advisor Services at Charles Schwab, discusses the many changes that have taken place in the financial advisory field this year and how firms should prioritize how they attract, develop and retain talent and what changes the organization needs to make to prepare the next generation of RIA professionals when new trends take effect.
There are new opportunities that arise as the industry prepares for generational and demographic shifts. This pivot is an opportunity for RIA firms to think about how they approach talent acquisition and workforce enhancement to accommodate the changes that lie ahead:
— Supporting advisor firm growth through career development.
— How advisory firms can differentiate themselves.
— The next generation of advisors and clients: millennials.
Supporting Advisor Firm Growth through Career Development
An RIA firm’s people is arguably its most important asset. For financial advisors to have a clear understanding of their role, RIA firms can consider developing a career plan for advisors so they know what to expect from the role at different career stages.
“A career path gives professionals reasonable expectations for their success in a firm and lets them know how they will benefit financially, intellectually and socially at every step,” according to the CFP Board’s report, ” Financial Planning Career Paths, Building More Sustainable and Successful Businesses.”
The financial advisory field can be rewarding but there are various levels of knowledge, experience and responsibility to master. Building a career development plan is helpful for financial advisors at multiple stages of their careers.
“We like to see firms create a cycle of opportunity. People want to work somewhere where they feel like there are growth and opportunity for success. They want to see that there’s going to be an investment in them and the ability for them to grow their career,” Salvi explains.
Regardless of whether your firm is large or small, you can start developing a career plan for your employees and gradually create a path for key roles at the company by defining job responsibilities, outlining expectations at certain levels and most importantly have mentors who can take those who are new to the field under their wing and show them how to interact and communicate with clients.
A career development plan is beneficial not only to the growing professional but also to the advancement of the firm. By providing career paths, advisors will be working toward professional achievements that will have positive side effects for the firm as financial advisors enhance their skills, develop relationships with clients and support business growth.
Julie Genjac, managing director of Applied Insights at Hartford Funds in Seattle , details specific ways firms can create career paths to support staff development.
“Job sharing or rotation between departments helps staff understand how various areas work together and potentially uncovers a skill set or passion that did not previously exist in a role,” she explains. Genjac adds, supporting employees toward licensing helps staff increase their competency. Also, specifying the job expectations and responsibilities within each role level helps employees “envision a glide path for advancement.”
How Advisory Firms Can Differentiate Themselves
For firms to be competitive in this new environment, Salvi says, they have to know the clients they’re serving and how their clients will benefit beyond financial advisory. Firms that make the effort to define who their clients are and the type of experience their firm can offer will translate their practices into valuable business growth.
Genjac encourages financial advisory professionals to ask these four questions to assess whether there needs to be an enhancement in particular areas, where she describes them as “the core of a strong team culture.”
“Do you have clear and systematic communication systems in place? Does each team member know what exactly he/she is responsible for day in and day out? Do you have avenues whereby one team member can ask for help from another team member that may have more capacity at that moment? Does your team foster open, honest communication as a standard way of engaging?” Genjac says.
As firms adapt to client needs, embracing the new virtual work environment experience will make a difference in client service. Investors are grappling with managing their investments during heightened market volatility so using tech services to monitor progress can be a differentiating factor in your RIA business.
Patty Carter, general partner, branch team talent acquisition, at Edward Jones in St. Louis, says, “We’re using virtual business enablement technologies at Edward Jones to ensure financial advisors can still deeply connect with clients and help build their confidence by using technology to illustrate progress toward their financial goals.
“Financial advisors who embrace these new tools will have more opportunity to grow their practices and serve current and future clients,” she says.
Another aspect to consider for firms to stay competitive is to evaluate which type of compensation approach fits best for their organization, which could influence financial advisor professional growth and company culture.
The CFP Board study differentiates between the fixed compensation approach and the variable-based approach, which offers advisors a commission-like percentage. The report explains how a compensation plan influences financial advisors’ career paths and work style, and defines how they cultivate relationships with clients.
“In general terms, variable compensation tends to encourage business development efforts, growth activities, high levels of productivity and ambitious practice expansion,” the report details. “Fixed compensation, on the other hand, tends to encourage higher levels of collaboration, teamwork and firm-level initiatives.”
But what truly drives growth to an organization and its employees is investing in them, Salvi observes, citing hard data from Charles Schwab’s annual RIA Benchmarking Study.
“When we look at our benchmarking study results, we identified a group of firms that have two times the growth in revenue over five years,” Salvi says. “These firms are more likely to invest in the professional development of their team members. It could be things like attending conferences, continuing education or encouraging them to take more leadership roles in their community.”
The Next Generation of Advisors and Clients
The Deloitte Center for Financial Services expects U.S. household assets to increase from $87 trillion to more than $140 trillion by 2030, of which $64 trillion is estimated to be investable financial assets.
Millennials will have the fastest growth rate of net wealth in the coming years, according to the Deloitte report. They’re making concerted efforts to save for retirement, are expected to have salary increases and are growing their assets, leading to important future generational wealth trends.
When it comes to serving millennials, RIA firms need to understand how this demographic approaches investing and their sentiment toward financial advisors. For those millennials who are investing, they are thinking about it differently than previous generations. They want to put their money toward areas of the market that align with their values and beliefs. Millennials ‘ investing behaviors show that they care about bringing about change that benefits society and the well-being of others. Millennials have been opting for robo advisors, letting technology drive their investing habits. The focus of millennials’ attitudes, beliefs and behaviors present a market opportunity for RIAs.
Cue in millennial financial advisors. For firms to get a comprehensive view of their way of thinking, it would be wise to employ millennials who can see eye to eye with them on a generational level.
“It’s becoming increasingly important for firms to develop teams that offer a range of perspectives, experiences, and backgrounds that reflect those of an evolving client population,” Salvi says.
Building an inclusive culture that facilitates teamwork and camaraderie will ultimately make your firm competitive. Young professionals looking for future employment desire to be a part of a company that embodies equitable ideals that connect with a tangible purpose of the organization. Having diversity and inclusion at the forefront will attract talent while driving value and growth to your business.
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