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Better Ways to Foster Young Talent

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It's no secret the industry's ranks have been graying. But while many recognize the need to cultivate a younger generation of advisors, there's too often a mismatch between goals and resources, according to a new study by Fidelity.

"It's important for the future of the profession that young people come into this business," says Jylanne Dunne, senior vice president of practice management and consulting at Fidelity Clearing & Custody Solutions.

More than a third of RIA firm owners plan to exit the business within the next 10 years, according to Fidelity's study. Industry-wide, a similar number of financial advisors are expected to retire, according to research firm Cerulli Associates.

In recent years, RIAs have been telling Fidelity their preferred succession method is to have someone younger take the helm, Dunne says.

But the problem is often there isn't an internal successor on board, she says.

"Firms are now saying that I have a horizon on the next 6 to 7 years, but I don't have a successor, so I will need to think about selling the business," Dunne says.

While more firms may be putting more resources into recruiting to avoid that fate, Fidelity's new study suggests they pay equal attention to retaining the recruited talent.
"Many of [young advisors] have an entrepreneurial drive and like independence, but a lack of structure at the start of their career can create a sense of dissatisfaction," Dunne says.


To keep young talent with the firm, provide new recruits with a supportive team structure and find ways to alleviate some of the pressures on newcomers, Dunne says.

For example, young advisors tend to perform better when provided with a salary in lieu of traditional compensation.

Fidelity's study also suggests that enabling young advisors to work with clients their own age may help them learn the ropes. Dunne says that this kind of policy, in combination with mentoring and a team format, can help younger talent succeed.

“Some of the firms said that you can hone your skills by working with these younger investors, but augment it by working on a team with advisors who have a more mature book," Dunne says. "That gives the advisors the best of both worlds."

But the critical element, Dunne says, is transparency.

New entrants to the profession need to have a sense of what their career path is going to look like, what support they can expect and clearly understand how they will be compensated, she says.

"We heard from [young advisors] that, 'Gee I really didn't know how my comp was being factored,'" she says.

Dunne says she recognizes that some of this may seem like common sense to some advisors. "But what is harder for some of these firms, particularly the smaller ones, is formalizing their programs so that advisors understand them and that there is a clear progression."

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