Growing the industry: New advisor development as important as ever

Financial advising is at a crossroads. Skilled, experienced advisors are heading out the door, only to be replaced by younger, inexperienced ones - and too few at that.

The average age of a financial advisor is now slightly older than 50. About 43 percent are older than 55, while only 11 percent are younger than 35. This is based on recent data from research firm Cerulli Associates.

What does this say about the state of financial advisors? It says that a significant chunk of the financial-advisor population is nearing retirement. Odds are, more than 12,000 advisors are about to retire, while the incoming advisor pool will only be about one-third of that. Stretch those numbers out, and it doesn't bode well for the industry.

Financial advising is at a crossroads. Skilled, experienced advisors are heading out the door, only to be replaced by younger, inexperienced ones - and too few at that. The need for well-trained advisors has never been greater, and the answer is stronger new advisor development. 

So, what does the landscape look like for new advisors today? Here's a peek:

Technology has shaped advising
It would be remiss to overlook the impact of technology on the financial advising industry. In fact, the scope and effectiveness of technology will directly affect the number of financial advisors in the future.

Several major trends - a few closer than others - include:

• Robo-advisors
• Online and virtual advising
• Advanced artificial intelligence
• Facial recognition and the ability to detect emotion

These elements are what need to be in place to truly, completely replace financial advisors. Computers have to be able to read client's emotions in order to offer appropriate guidance. While we aren't there yet, we are closing in.

Technology that does exist today - robo-advisors, online wealth management software - is reducing the demand for advisors. In order to cope, advisors should begin embracing technology. This is the first step for any new advisor on their way up the ladder. For example, advisors can use the cloud and video chat to stay in contact with clients on a more flexible schedule. Technology can also reduce costs and make the business model more efficient.

Technology shouldn't be feared, but the future of the industry needs to be viewed through the lens of tech growth.

Three steps forward for new advisors
A new financial advisor's development can be broken down into three main components:

1. Establishment
2. Foundation
3. Engagement

Below is an in-depth explanation of all three:

1. Establishment
Establishment is the initial phase of a new advisor's development. This is the time when they learn all there is to know about their firm's history, culture and current employees. The meet-and-greet stage, so to speak. The idea is to provide the advisor with an opportunity to learn about individual roles on the team and what is expected from them.

This is also the right time to discuss any and all compliance issues, regulations, business practices and other related elements of the job. New advisors can be overwhelmed by the career and the fresh start, so working through the subtle nuances of the role is a must. It will also make them a more responsible and effective advisor in the future.

The fact is, the establishment phase will give the advisor all the tools he or she needs to get started.

"Knowledge is the foundation for any new advisor."

2. Foundation
Next on the list is the foundation. Like it sounds, this is when the advisor will build a strong base on which to add clients. This phase addresses advisor education, specifically the core wealth management skills needed to excel at the position.

From investment management to tax planning and everything in between, the knowledge of the industry remains fluid. New trends, regulations and the economy all have an effect on the right guidance to offer, so advisor training is a life-long process. This stage of new development is when the advisor is brought up-to-speed on all the current events in the industry. 

It is also when any of the firm's in-house wealth management training should take place. As it sounds, a high level of expertise in the industry is the foundation for any successful career.

3. Engagement
The third, and final, phase is engagement. This is when the new advisor will be introduced to the client. Engagement can be broken down into three parts:

1. Advice delivery
2. Client administration
3. Client experience

New advisors should first work on their face-to-face relationships, how they communicate and how to talk to clients. Each element can evolve depending on the specific client. Useful tools for this step include social media and client management software. Of course, there is no substitute for experience, so new advisors should also talk to a coworker about client communication tips.

Client administration refers to the day-to-day client management steps. It requires planning for each meeting, asking the right questions, presenting facts in an easy-to-digest manner and more. Advisors don't just need effective guidance, they need to deliver it in a way that gets the message across.

Finally, the client experience simply means making clients happy. Advisors will have to check up regularly, build trust over time and create attainable goals and expectations. Happy clients are good for all involved.

"Experienced advisors can help mentor new ones."

Add structure to new advisor development
The hardest part for any new employee is learning the ropes. The experienced staff members are locked into their roles and can make it through their day without a hitch. New advisors over-think every minor detail.

An advisory firm that adheres to a strict structure for onboarding - establishment, foundation and engagement - can help cultivate higher quality advisors. Not only will this improve the business itself, but it will help curb the growing trend of technology replacing advisors.

At the end of the day, the new advisors need to be better than the old ones. The industry is in flux, with many respected professionals heading out the door, and who comes in next will have some big shoes to fill. The best ones will have top-shelf critical thinking skills and an affinity for technology. They won't fear it - they'll instead incorporate it into their business. For the firms that employ them, the trick is creating a system that allows advisors to reach their full potential.