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BROKER’S WORLD:
How Young Advisors Work With Older Clients

By SCOTT STEARNS
A Dow Jones Newswires Column

NEW YORK -- Owen Malcolm was a 25-year-old financial advisor whose money concerns were centered on a new house, a newborn daughter and student loans.

The clients in his office, a couple in their late 50s, were paying off the last of their home mortgage, looking toward retirement and seeking ways to fund the educations of their young grandchildren.

“They had kids that were all older than me,” said Malcolm. “I thought, “what on earth am I doing?’”

Malcolm, now 29, said he went on to develop “a great rapport” with the couple, in part because he knew their son from college. But learning to work with clients who are decades older, more experienced and wealthier is just the beginning of the hurdles young advisors face as they strive to become established.

The early years are a struggle to gain credentials, credibility and experience in finding and serving clients. For some, the toughest part is learning to sell. Others find it hard to reach beyond their familiar social circles to gain new business. All deal with the crushing time demands of studying for professional certifications.

Thousands of young people graduate each year from roughly 140 college-level financial-planning degree programs that prepare them to sit for the Certified Financial Planner exam. Some start their work lives in unglamorous back-office positions or spend their days cold-calling long lists of prospective clients. The lucky ones get to shadow a financial advisor and sit in on client meetings.

The biggest challenge for many, whether they’re cold-calling at a large broker-dealer or seeking clients for a small financial-planning firm, is simply coming to terms with the need to sell.

“I wish I’d realized from the start how much the business development side is about sales,” said Michael Kitces, 28, director of financial planning at Pinnacle Advisory Group, a Columbia, Md., firm with $400 million under management. Kitces, who started his career selling life insurance, said he initially underestimated the importance of “continuously meeting new people and developing new prospects,” not to mention the difficulty of convincing them that his advice was worth paying for.

Young advisors usually start out pitching their family and friends, but quickly run into trouble if they don’t widen their circle and aim for high-net-worth clients. That means learning the hard lessons of marketing and prospecting for new business.

“Prospecting is a tough job. Some people absolutely love it. Some people don’t like it at all,” said David F. Woods, chief executive of the National Association of Insurance and Financial Advisors, a financial-services trade group. “You have to be willing to do on a daily basis things that the unsuccessful person is unwilling to do.”

Sell Well Or “Get Lucky”

The friends-and-family route, at best, will bring enough assets to get an advisor started, said Jon Yankee, a 35-year-old financial planner at Rembert, Pendleton & Fox, a Falls Church, Va., firm with $600 million under management. He began his career in a professional development program at Merrill Lynch & Co. (MER) and was an advisor there for two years, during which the emphasis was squarely on attracting client assets. Once you’ve mined your personal network, he said, you have to be a very good salesman or “get lucky,” as a Merrill colleague did when he landed a dot-com executive with a $100 million IPO windfall through a cold call.

Once affluent clients are in the door, young advisors have to learn how to interact with them. Many of these clients are sophisticated about money and are used to dealing with high-end accountants and attorneys.

“You learn so much in school as far as book knowledge,” but it doesn’t prepare you to work with wealthy people, said Edward Kramer, 23, who graduated last year from Texas Tech University with a financial planning degree. “There’s so much protocol that’s unwritten.”

Kramer regularly sits in on client meetings at Abacus Planning Group in Columbia, S.C., which manages $300 million and requires clients to have at least $2 million of investable assets. He said meeting these clients was “intimidating at first,” until a more senior advisor counseled him to remember that clients are there to seek his help with their financial lives.

“When I took that mindset, they weren’t scary to me anymore,” Kramer said.

Malcolm, who as a 25-year-old struggled to advise clients in their late 50s, said you can’t force a good fit between advisor and client.

“You have to be yourself in front of clients,” said Malcolm, who is now chief operating officer of Sanders Financial Management, a suburban Atlanta planning firm with $100 million of client assets. “An advisor shouldn’t try to fish for superficial data or small talk just for the sake of making a connection.”

Gaining Confidence

Young advisors who’ve learned to deal with older, wealthier clients say it’s important to project confidence, which comes by demonstrating technical know-how gained on the job and through professional education.

“The first thing a young planner has to realize is that certain older clients will never take you seriously. They look at a young planner and see their grandchildren,” said Kirk Kinder, a 34-year-old planner at Financial Guidance Group, a Palm Harbor, Fla., firm that caters to retirees. He sets clients’ minds at ease by pursuing a conservative investment philosophy and writing in-depth newsletters that demonstrate his understanding of financial markets and tax laws.

When prospects openly question his age, Kinder points out that he earned his certified financial planner designation more recently than older planners, so he’s up on the latest planning strategies. He touts his tech-savvy. And he reminds them that while older planners are approaching retirement themselves, he expects to be in business for the next 30 years.

Bernard Kiely, a Morristown, N.J., financial planner with more than 20 years of experience, recommends young advisors find clients with similar life experiences or financial concerns. For instance, he counseled a young advisor whose husband had passed away to gear her practice toward widows. The key is to work with clients to whom an advisor can say, “I understand what you’re going through,” Kiely said.

But serving peers can leave young advisors with a roster of low-net-worth clients that may not be profitable for many years. Some accept that to plant seeds for the future. Kramer said the younger planners at his firm are also reaching out to newly minted CPAs and attorneys in hopes of landing referrals down the line. “We can grow up together,” he said.

Most young people entering the profession should expect to invest six or seven years in getting established, said Yankee of Rembert, Pendleton & Fox. A young advisor who gathers that experience and picks up professional credentials then becomes a valuable commodity for financial-advisory firms.

“You can write your own paycheck. Everyone is going to want you,” Yankee said.