The financial service industry is facing a crisis. Advisers are getting older, and there is a dwindling number of young advisers to take their place. The cause of the problem is obvious, as is the solution.
Traditionally, advisers were trained by insurance companies and wirehouses that cast their young on the beach like newly hatched turtles — only a very few, who can sell, make it to the ocean to develop into full-fledged adults. Insurance agents are forced to sell to their relatives, while wirehouse reps are given a list to cold-call. Seem appealing to you?
At the same time, there are more than 100 million participants in 401(k)s and 403(b)s who cannot afford traditional advice and are screaming for help, as are their employers.
Training advisers to be financial coaches or mentors is more appealing to the younger generation. Rather than cold-calling or selling insurance or high-priced annuities, these younger advisers would be contacting “clients” of their firm with the blessing, and fiduciary oversight, of their employer. How can retirement plan advisers get involved?
Some firms, like Financial Fitness for Life, Financial Finesse and Mentoro, have created businesses that advisers can leverage using certified financial planners to work with DC participants. Record keepers like Empower have also hired CFPs to work with participants.
To groom the next generation, retirement plan advisers need to start acting like law firms that have summer internship programs to hire their next crop of professionals. Rather than expect these young lawyers to immediately start generating new business, law firms train them to work with existing clients under the mentorship of senior attorneys.
Greenspring Advisors in Maryland has a structured 12-week program in which it works with college seniors taking CFP programs, rotating interns through its retirement and wealth management business, which includes $5.5 billion in assets under administration, with $4.4 billion in DC plans.
“I joined Merrill Lynch when I was 23 years old, [when it] had a high attrition rate. Lots of talented young people didn’t make it because of lack of sales,” said Pat Collins, a partner and managing director at Greenspring.
Greenspring uses young CFPs, many of whom made it through its internship program, to conduct one-on-one meetings with DC participants, for which the firm either charges separately or bundles with the plan fee.
“People are interested in ongoing advice versus on-demand. Most employers are eager for us to offer this service,” Collins said. These meetings also lead to wealth management opportunities.
“Covid has accelerated these services, as everything is available on Zoom,” he added.
Financial wellness programs have failed if measured by a change in participant behavior or fees paid. What’s needed is a combination of professionally trained advisers providing ongoing one-on-one advice enabled by technology and smart data.
But it starts with people.
DC aggregators have the resources and capital to train advisers, stack technology and create a process to help DC participants while uncovering wealth management and rollover opportunities. Broker-dealers have the required resources and professionals to help the underserved DC participants, especially if they get ahead of the DOL’s upcoming fiduciary rules on IRA rollovers.
But even independent RPA firms like Greenspring can participate, if they have foresight and will. This can solve succession problems and provide unique services to plan sponsor clients, for which the firms get paid, while feeding prospects to their wealth management group. Sounds like a good business model.
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As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.