“Coach’s Forum” is a place in which you can ask your questions, tell your stories or give your opinions on any aspect of practice management. For each column, George selects the most interesting and relevant comments from readers and offers his advice. Our objective is to build a community of people with a common interest in making their financial advisory practices as effective as possible.

Advisor says: Your recent column “From the successor’s point of view” [March 2016] interested me greatly. I, too, am a younger advisor (age 32) who had hoped to join a veteran advisor, with a view to acquiring an interest in his or her business over time and, ultimately, assuming ownership of the entire business when that veteran retires.

In fact, I have been involved in two failed attempts to become part of a succession plan. In neither case do I put all the blame for the breakdown on the other guy; however — for now, at least — I have given up on the idea of partnering with an older advisor and am focusing on building a practice by myself.

Perhaps I will try again in a few years to find an advisor who recognizes the value in working with a younger person to ensure a smooth transition of the business.

In the meantime, any suggestions to help me create a practice that older advisors would some day find attractive as a merger candidate?

Coach says: Judging by the number of comments generated by the column you mention, I admit that I have underestimated the difficulty that wellintentioned younger advisors are experiencing in trying to secure a position in an established practice as part of a succession plan.

This is distressing. Finding successors clearly is in the best interest of founding advisors, their clients, their firms and the industry to have continuity of advice and service assured through longterm internal transition plans.

So, why isn’t the success rate better than it appears to be? There are two sides to the debate. Let me highlight a couple of recurring themes from the messages I’ve received.

The first is the pace of transition. Potential successors want to move quickly; founding advisors want to proceed slowly. I think this dichotomy is more than the unfairly criticized “I know I just graduated from law school, but why can’t I be a partner?” millennial mindset that many older entrepreneurs who spent years building their businesses cannot understand. In my view, it is more the emotional challenge for these established advisors in letting go of their life’s work that gets in the way. Because these emotions are not always evident, even to the founding advisor, they create an invisible barrier to moving forward with a transition.

The second disconnect I’ve heard a lot about is how the business should be developed and managed in the future. Older advisors often insist that the business continue to do what it has always done: focus on the same target market, use the same brand messaging, follow the same processes, offer the same products and services, and so on.

One advisor wrote that his partner’s favourite saying was “I have been doing this for 25 years — trust me, it works!” To be sure, that founding advisor had concrete proof that his methods worked — for him. Could some of them also work for the younger advisor? Quite possibly, they could — but not to the exclusion of other methods that might work better for a younger advisor with a younger generation of clients.

And just when I was beginning to think there was no easy way out of this dilemma, I had a fortunate encounter with a young man who gave me hope. Aaron is a 36-yearold advisor from Boston whom I met when we presented at the same financial planners’ conference in Texas last month. My talk was about how to create and implement a traditional succession plan. His was all about how he had tried that process — and failed — and now is building a great practice independently.

Here is Aaron’s story:
After 12 years as a salaried employee in financial services institutions, Aaron’s latent entrepreneurialism pushed him to become an independent advisor in 2008 — not the best time to start a new financial advisory business. He barely survived the global financial crisis of 2008-09, but he hung on.

Aaron earned his certified financial planner designation and focused his practice on financial planning. However, he soon realized that the industry offered little advice for the Gen Y/millennial clients who were Aaron’s age and formed his natural market. For example, financial planning software programs focus on retirement, something rarely on the minds of Aaron’s 30-year-old clients.

“What meaning,” Aaron asked me, “could a Monte Carlo simulation that says I will have somewhere between $500,000 and $3 million at retirement possibly have for people trying to pay down their student loans?”

He also discovered that older advisors he approached about being part of their succession plan had little appetite for partnering with a young advisor whose clients didn’t have much in investment assets and recurring revenue.

Eventually, Aaron concluded that the only way to achieve his personal goals is to build a business that suits his generation.

Here is what Aaron did:

1. Identified a specialized market. Aaron chose “professionals and junior executives under age 35” as his target market. He understood their needs, could provide valuable advice and would enjoy working with people who thought like he did. He also had clients in that market already who could provide introductions.

2. Researched key issues. Through interviews with existing clients and others in Aaron’s social network, he identified the financial concerns most on the minds of his target market. This helped Aaron prepare his value proposition and marketing message.

3. Developed expertise in the key issues of potential clients. Aaron discovered, for example, that there are numerous government programs to assist recently graduated students reduce the immediate burden of repaying their student loans. This will allow these clients to save or invest more aggressively early in their careers (and to pay Aaron’s financial planning fees). He also developed specialized knowledge in other relevant areas, such as cash-flow management, buying vs renting a home, funding a startup business and caring for aging parents.

4. Became known as a “subject matter expert.” Through Aaron’s website, seminars, webinars, blogs, social media postings and written articles, he built a reputation as a “go-to guy” for information and insight regarding financial planning for millennials.

5. Created a “virtual practice.” Aaron put himself in the shoes of his prospective clients and constructed the type of practice he felt he would like to do business with. For example, he has no physical office, and all services — such as financial planning, initial consultations and client meetings — are conducted online.

6. Made access to advice affordable. Aaron recognized that millennials are accustomed to monthly fees for gym memberships, etc. To keep costs reasonable, he charges a one-time fee (US$2,000) for the initial financial plan and account setup; a monthly fee (US$167); and, because he invests only in exchange-traded funds, he charges no assetmanagement fees.

Aaron is adding two to three new clients every month and building a practice with low costs, growing assets, recurring revenue and scope for more products and services. I am confident the day isn’t too far away when veteran advisors will be knocking on Aaron’s door, hoping he will let them in. IE

George Hartman is CEO of Market Logics Inc. in Toronto. Send questions and comments regarding this column to george@marketlogics.ca. George’s practice-management videos can be viewed on www.investmentexecutive.com.

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