New talent – new expectations

Baby-boomer financial advisors are retiring at a faster rate than they can be replaced. Recent research addresses the shortage of incoming talent and describes differences between boomers and millennials in their approach to – and expectations of – the profession.

An Ernst & Young report published in 2018 showed that advisors under the age of 40 make up only 22 percent of the profession, and just 5 percent of financial advisors are in their 20s. According to a J.D. Power study conducted in mid-2019: “The average age of financial advisors is about 55, and approximately one-fifth of advisors are 65 or older.” CNBC has reported that headcount in the financial services industry is expected to decline by 5.8 percent between 2017 and 2022, compared to a 1.6 percent increase between 2012 and 2017.

The J.D. Power study came a year after the EY report and found an even more dire situation. “Advisors under the age of 40 account for only 11 percent of the financial advisor population,” J.D. Power noted, “and the support they want to help them develop a successful practice looks very different from that of the previous generation.”

In other words, the generational disconnect is reflected not just by age, but by experience and by diverging ideas about what goes into building a strong financial advisement practice.
Kirk Chisholm, principal and wealth manager at Innovative Advisory Group, Lexington, Massachusetts, points to several generational distinctions within the ranks of financial advisors.


Lacey Cobb, CFA, CFP®, and director of advisory services at San Francisco-based Personal Capital, agrees to some extent. For her, those with more time in the field have indeed seen and been through more first hand, but whether or not they effectively communicate their experience and observations to clients can be hit or miss.

“An advisor who has been working in the industry for longer is going to have more experience, but that does not necessarily say anything about the quality of the advisor,” she says.

Cobb stresses that experience is important, but competence and the ability to learn and adapt are arguably far more important. What’s more, the younger generation of advisors, many would argue, are better suited to adapt to a rapidly changing professional environment.

“There has been a dramatic shift in the financial services industry over the years and what had worked in the past no longer works,” said Cobb. “Advisors must better differentiate and quantify their value to survive.”

Older advisors have not always been quick to embrace changes in the industry, and some point out that this has led to a discernible disconnect. Chisholm, for instance, says that the older generation of advisors has not changed in decades but, “culture has changed.” He maintains that many advisors “are living in the 90s with their approach to working with clients.”

The J.D. Power study explored this notion of cultural change. Mike Foy, J.D. Power’s senior director of the company’s Wealth and Lending Intelligence offered snippets of evolving cultural norms.

“The 9-to-5, office-based culture, with its coffee for closers and gong-ringing ceremonies to celebrate new sales is gone,” he said. “The younger generation has a leg up on older advisors because they tend to be more adaptable to new technologies and they also tend to be more focused on helping their clients first – versus the older generation which is more focused on a product-centric approach.”

Last summer’s J.D. Power findings support Chisholm’s point. Its 2019 U.S. Financial Advisor Satisfaction Studysm calls the new generation of financial advisors “digital natives” who expect technology to play a more important supporting role. “And,” the report states, “they are much less satisfied than older advisors with the technology support they currently get from their brokerage firm.”

In a statement marking the release of the J.D. Power study, Foy said there is a new generation of mobile financial advisors interacting with clients and prospects via a range of digital channels including social media, text, chat and video. “Wealth management firms that embrace these technologies and train and empower advisors to use them effectively will ultimately win the war for talent, but very few are delivering the solutions that younger advisors demand,” he said.

Cobb also brings a personal perspective to the issue. She sees herself at the tail end of millennial advisors, and started her first finance job within two weeks of Lehman Brothers collapsing (September 2008), as the financial crisis began to spiral out of control.

“I was one of the lucky ones,” Cobb says. “But I think the advisors who were in college during the Great Recession had to fight much harder to get a job in a much more competitive environment than many veteran advisors.” She believes The Great Recession created different challenges for everyone in the industry, and had profound impact regardless of one’s life stage.

“Quality advisors take an objective view and stay humble when it comes to managing money,” Cobb says. “Advisors with an ego, thinking they have a superior ability to navigate financial markets, tend to be the most dangerous,” she cautions, continuing, “In my opinion, those are skills that have less to do with age.”

And then there is Mike Radakovich, CFP®, co-founder of Portland, Oregon-based Summit Advisors NW*, who readily contends he has not noticed a significant difference in mentality between older and millennial advisors.

“Both share a sincere desire to help others achieve their goals, integrity, and compassion. Both were shaped by similar experiences – older advisors by the issues of fear and insecurity faced by their depression-era parents and grandparents, and millennials by their personal experiences during the Great Recession,” he said. “Just as older advisors have been successful by looking to the future, so can younger advisors.”

Be that as it may, younger advisors have a leg up in the information age that’s so heavily rooted in technology, but they don’t see their companies as adequately keeping pace with technological change.

Citing the J.D. Power study, Foy has acknowledged that when it comes to technology, younger advisors score their firm low on reliability, relevance, and responsiveness of support.


Still, well before younger talent even joins a firm with their high expectations, they first must be lured to the field. And on that front, there are some positive signs.

According to a June 2019 article on the CNBC.com website, “There are now more than 200 colleges and universities offering 300 financial planning programs that enable graduates to take the CFP exam. That compares to about 125 five years ago.”

As J.D. Power has noted, as more and more boomer financial advisors move into retirement, tomorrow’s leading firms will be those that effectively attract, develop and retain new advisor talent. Those in the industry agree that both younger and older generations of advisors can bring something different to the profession. Many point out that they can possibly learn from each other to improve their respective weaknesses. Passing on knowledge to the next generation, and the next generation sharing technological prowess will be vital to bridging the current divide.

*Securities and advisory services offered through KMS Financial Services, Inc. Member FINRA/SIPC and an SEC Registered Investment Advisor. Summit Advisors NW and KMS are separate and unaffiliated. Summit Advisors NW is not a registered investment advisor or broker-dealer.