Being a young financial advisor is no easy road. In addition to clients perceiving you as “green behind the ears”, it is a gargantuan task to convince someone to trust you with his or her money when you have less than $10MM in assets under management. This is all changing, however, with shifts in investor demographics and a growing consumer preference for more socially and environmentally friendly strategies. Unlike ages past, demographics are now working in favor of younger advisors. Another factor working in young advisors’ favor is the graying of the industry. Now is the time for young advisors to partner with the more senior advisors who are looking to exit within the next 5 to 10 years. This will create continuity for their practices and a viable succession plan. There is such a shortage of young advisors in the industry that the opportunity there is ripe for the taking!
For those who are willing to pursue impact investing, this presents the single greatest opportunity to grow your practice that has ever presented itself to the industry.
Investors are Fed Up with Wall Street!
The reason the entire financial advising industry is undergoing a massive shift has a lot to do with the financial crisis of a decade ago. Greed on behalf of Wall Street and the big banks is perceived as the culprit for the mortgage crisis that made finding a job nearly impossible for the Millennial generation, who were the newly minted college graduates at that time.
When you’re living on your parents’ sofa and can’t get the job that you amassed $200k of college debt to be qualified to do, the last person on your Christmas List is Mr. Wells Fargo or Mrs. Morgan Stanley.
And even the more senior generations weren’t thrilled with having their retirement savings vanish overnight due to recommendations that were made by financial advisors, services that they paid high commissions or retainer fees for.
This contempt was the catalyst for creation of digital only advisors such as Betterment to come into the fray and scoop up all the disgruntled investors who were ready to kick their gold cufflinked financial advisors to the curb.
But disruptive technologies weren’t the only outcome. The Occupy Movement was a wave in the tide of social awareness that was taking over the street. Literally. The result is a new way of thinking about money.
A New Appetite for Impact Investing and Social Good
Although socially conscious investing has been around for decades, it became much more popular as a result of the ideologies that emerged after recession.
Socially responsible investing (SRI), is one of the finance industry’s favorite acronyms. SRI investors abstain from directing funds to any company that violates certain environmental, moral, ethical, religious, or social values. For example, if a pharmaceutical company do not uphold proper disposal procedures, it is not a candidate for an SRI portfolio. Other prohibited investments include “sin stocks” such as tobacco or casino companies.
Now enter the Sustainable Development Goals (SDGs). These are principles that were propagated by the United Nations in 2015 for the purpose of transforming the world by ending hunger, protecting the environment, etc.
When you combine SRI and SDG, other than winding up with a barrel of financial acronyms you also get the ability to attach a social meaning to your investment. This infusion of purpose has caught on, both in numbers and in theory. A recent Investment News conference about “Innovators in Investing” confirmed that there is over $8 trillion in assets at work in impact investing strategies. This can be directed through sustainable mutual funds, ETFs, variable annuities, stocks, or bonds.
Industry Demographics Working in Favor of Young Advisors
Impact investing allows young advisors the opportunity to overcome age bias and lack of perceived value.
The numbers driving the next generation of wealth tell the story the best.
According to the Fidelity 2016 Millionnaire Outlook Study, 73% of high-earning millennials would be more likely to work with an advisor if the fees were lower. This indicates a profound lack of perceived value attached to the financial advising profession. (as per Fidelity, 2016)
But at the same time, there is a great deal of business to be done by those advisors who are somehow able to convince this population that their services are worth it. According to Accenture, there is $1 trillion projected to transfer to younger generations every year through at least 2050. (Accenture, 2015)
Capitalizing on the Trends
So how does a young advisor with a small book of business get out there and convince the market that it’s worth it?
First, you’d have to present yourself as being a particular brand of advisor, one with ideals and values that are congruent to that of these investors. To do this, you’d have to be aligned with a firm that carries that particular message. In addition the firm would have to provide access to ESG, SRI, or impact investments, preferably ones that the investors can’t get on their own.
Two, you’d need to tailor your service offering to this group. You’d have to come across as a subject matter expert who has more knowledge about impact investing than the average person out there. This is how you would tip the scales and win their trust and confidence.
Young advisors looking to get into the impact investing space should choose their firms wisely. Let’s take for example the young advisor program at Vanderbilt Financial.
Visibly Practice What You Preach
Vanderbilt is a sustainable broker dealer firm that is completely committed to the impact investing space. It went as far as to construct its headquarters as a LEED platinum building, the first on Long Island. This differs from other investment firms that promote impact investing but are housed in environmentally offensive buildings.
Does being in a LEED platinum building make it easier to convince a skeptical, jaded Millennial that Vanderbilt is truly committed to doing social good? Yes! It goes even further – it’s an inspiration to them.
According to the CEO Steve Distante, “When we give a tour and point out all of the features and thought that went into the project, they become raving fans and proud to be working with a company that values doing good in everything that we do, including our headquarters.”
Be Technology Enabled
In order to establish the firm’s brand online, Vanderbilt Financial has a robust social media platform that promotes the firm’s values and messaging. This is critical to reaching the technology savvy Millennial generation. Not all investment firms are onboard with the social media wave.
Some types of firms, such as the wirehouses and the larger broker-dealers, don’t afford their advisors the same freedom when it comes to social media. How can an advisor develop their online brand and reach these Millennials if they can’t even create a customized blog posts to voice their thoughts? Standard boiler plate marketing type messaging doesn’t bode well with this group. Remember, they’re not drinking the corporate style Kool-Aid.
Join an Inspired Culture
Vanderbilt Financial is a great place for a young advisor who wants to get into the impact space. The firm’s leadership is very passionate about promoting these social ideals, and this sentiment results in an inspired workforce culture.
Young advisors are trained and groomed so that they can come across as knowledgeable experts in this area. At other broker dealer firms, young advisors are trained in product speak and practice management. We focus on educating advisors about how to listen to people and understand their values, and then we find that the rest of the sales pitch takes care of itself.
Advisors interested in making a meaningful contribution to society by helping people invest in companies who are doing good in the world should Join Vanderbilt today. Contact us to learn more.
Accenture Wealth and Asset Management Services Point of View: (2015). The Greater Wealth Transfer: Capitalizing on the Intergenerational Shift in Wealth. Retrieved from https://www.accenture.com/us-en/~/media/Accenture/Conversion-Assets/DotCom/Documents/Global/PDF/Industries_5/Accenture-CM-AWAMS-Wealth-Transfer-Final-June2012-Web-Version.pdf.
Fidelity Investments. (2016.) A Future-Ready Pricing Model: Finding the Right Formula in a Changing Landscape. Insights from the 2016 Fidelity RIA Benchmarking Study. FMR LLC. Retrieved from https://clearingcustody.fidelity.com/app/proxy/content?literatureURL=/9879252.PDF
Investment News. (2017, November 6). Investing for Impact: How ESG is Changing the Game. Presented at the Innovators in Investing Series Conference. New York, NY.