Anyone in the financial advisor profession knows about the graying of the industry and the need for young blood and new faces to replenish the ranks. But hiring new advisors has its own set of challenges, as detailed by two advisory firm executives who spoke on a panel at the Financial Services Institute’s OneVoice conference this week in Orlando.

The panel discussion focused on how to attract new financial advisors to the industry. The hiring needs and training related to new advisors can differ between, say, smaller independent registered investment advisor firms and larger companies with hundreds—or thousands—of advisors. But some of the basics, such as integrating new hires into the flow and dealing with the generational differences they bring to the table (at least for those in the millennial age group), cut across all advisor channels.

Derek Burke, president of Waddell & Reed Inc., said companies should have a plan before hiring new advisors because the entire process is a huge commitment of time and money.

“What are you looking for that advisor to do?” he asked. “You need to define the market in terms of where that advisor is going to work. What skill sets will he or she need?”

Along with its asset management division the runs two mutual fund families—the Waddell & Reed Advisors Funds and Ivy Funds, Overland Park, Kansas-based Waddell & Reed also has nearly 2,000 financial advisors who advise on about $50 billion in assets across its broker-dealer and RIA channels. About two-thirds of its advisor business is fee-based.

Burke said his company’s experience is that it’s not easy teaching new dogs old tricks.

“In terms of development, we’ve finally recognized that you can try to force this new generation of people to learn under the old construct, or you can just think about how they want to learn. We try to leverage the tools they [millennials] are comfortable using,” he said.

Burke said Waddell & Reed can’t afford to break in new employees the old-fashioned way where they’d spend hours and hours each week training people one-on-one.

“Some aspects of training can be consolidated and centralized, and with technology you can have a compelling training session with 30 advisors versus one sitting across the table,” he said.

But even so, he acknowledges that millennials bring a different mindset to the process.

“Millennials keep us honest in that they’re more willing to call out the frailties of the program,” Burke said. “Before, you’d give folks the roadmap and they’d go after it. The millennials step back and challenge you and say, ‘I’m not really sure I’m ready to do that.’ So that’s the quandary we have right now.

“That’s where in our organization they look for that teaming or mentoring opportunity,” he continued. “What we try to do with our less-experienced advisors is help them understand that no matter who you are, you’re never going to know everything. It’s about the life coach philosophy where your job is more to listen and really understand what the client is looking for, and then go back and lever your local leadership, home office resources and the like.”

As Burke noted, the financial advice business is a lot more complex than it was back in the day when you could earn a paycheck by selling mutual funds to folks at the kitchen table. Current trends that increasingly are driving the business, such as fiduciary responsibilities and holistic financial planning, require a lot more training and a greater gestation period for new advisors.

As such, Burke said Waddell & Reed probably doesn’t break even on its investments in new hires till the sixth year they’re at the firm . . . provided they’re still there by then.

“It sounds great to bring new advisors to the firm and it’s a great way to grow your business, but will you be spending more than you’re bringing in over a long period of time?” he asked.

J. Scott Spiker, CEO of First Command Financial Planning Inc. in Ft. Worth, Texas, said his company works with a different talent pool than most other firms in the industry.

First Command started 58 years ago by serving the financial needs of the military. About 15 years ago it expanded its mission to cover federal employees, and 10 years ago it started offering its services to the general investing public. It has about 550 financial advisors across its hybrid broker-dealer/RIA structure.

Because of its military focus, 70 percent of First Command’s advisors are either military or the spouse of military, Spiker said.

“They can be 40 to 45 years old at retirement when they join us, and we benefit from their maturity and their service-mindedness,” he explained. “But someone who joined the military at 18 years old and is two years away from retirement is still a millennial, so we’re paying attention to that demographic.”

Spiker’s experience has shown that what new hires are looking for in a company is a richer value proposition presented right upfront. “They want to see the whole lifespan of that whole proposition; they don’t want to just see Step One,” he said.

“We’re finding that we have to offer our advisors a lifelong continuum training,” he said. “What’s important in the first years are different than during the middle years. For millennials, they need to see the continuum to know this is the place for them. For me, this has become more pressing with millennials joining our company in that they need to feel and see we’ll be investing in them throughout their career. That’s become a bigger part of their decision making.”        

According to Spiker, new advisors at First Command take part in an intense 18-month period where most of what the company teaches them isn’t answers, but questions.

“We don’t test them on getting the answers to the questions; we test them on whether they can get the questions right,” he said.

“We’ve massively expanded the support services we put around our advisors because they can’t know everything," Spiker said. "I’d rather have them spend the first 18 months in soft skills."

And as the rookies learn those soft skills, the company provides copious hard skills support—sales, financial planning, marketing, tech and practice management—to help them get established.

“That’s an expensive proposition,” Spiker said. “I think we’re kind of going against the rest of the industry as we make our value proposition richer and richer to support this ability to learn. But it all starts with the relationship skills, because without them you won’t survive.”  

Meanwhile, First Command provides a “modicum” of compensation and benefits, which means new advisors are employees for their first 12 months, and then they become independent advisors. But Spiker cautions that advisors who don’t achieve a certain base level of success are bounced from the company during that first year.

Spiker said the company used to have lots of turnover, but as it has got back more to its core client market and gotten deeper into the upfront soft skills training with plenty of hard skills support for new advisors as they learn the ropes, wash-out rates have markedly declined.

“We have about a 60 percent first-year survival rate and a 48 percent four-year survival rate, and that’s up about four or fivefold the past six years. And I’m pretty darn proud of that,” Spiker said.

Some audience members nodded their heads and murmured in agreement that indeed, those survival rate numbers are pretty good. And if that’s the case, it speaks to the challenge of attracting, training and keeping talented new advisors that the profession needs to grow in the 21st century.