Most of the wealth in America remains concentrated among households over 50 years old. But the RIA firms with younger clients are growing faster and they are more sustainable.
Attracting younger advisors is critical to building a firm poised to capture younger clients whose assets are likely to rise decades to come, notes Kate Healy, managing director of NextGen at TD Ameritrade Institutional.
Millennials suffer an unfair reputation as job hoppers, Healy said in an interview at TD's annual Linc conference yesterday. "They don't want to change jobs but they do want to know how their career track" will progress, she explained. "A career path doesn't have to be a binder."
Most RIAs run small firms without human resources department, so the idea of creating a career path can be something of a foreign concept to them. This track doesn't need to be an elaborate document but it does require certain goals like classes to be taken and certificates to be attained.
At present, the shortage of new talent is the biggest single constraint facing the profession, Healy said. Most college students in financial planning programs enjoy multiple job offers.
"If you want a summer intern at this time of year, all the juniors and seniors are taken so you are talking about freshmen and sophomores," she said.
The cost of an intern amounts to $1.5 million in assets under management, she added. So if a firm can't afford one, they might want to question why they are in business.
Internships represents a tryout for both the intern and the RIA firm. Ideally, Healy said they should spend a few weeks in each department and sit in on client meetings, even "if they don't say a lot." The fact that an older advisor has backup support can provide a degree of reassurance to clients.
After young advisors are hired on a full-time basis, it's highly unrealistic to expect them to "be rainmakers right out of college," she noted. But after they start to gain competency, they can be an asset in retaining multi-generational families and capturing younger clients.
As for the widely covered FIRE (Financial Independence Retire Early) movement, Healy said she has not seen a lot of millennials looking to get rich quickly to leave the workforce. She has witnessed many NextGen folks who are big savers seeking to be able to withstand the drawdowns in 401(k) balances, foreclosed mortgages and financial damage from layoffs that hurt prior generations.