As the advisor force ages, firms are faced with the challenge of recruiting and training the next generation. Wealth advisor Robert J. Ellis, who is also an assistant professor of finance and international business at Ithaca College, believes his wealth management seminar, which debuted last fall, could be part of the solution. He tells Associate Editor Mason Braswell how his new undergraduate course could change the wealth management demographic.
1. What does your class focus on?
The final project is to develop four portfolio solutionsone each for a mass market, mass affluent, high net worth and ultra-high net worth client. Students have to address insurance, real estate, estate planning, transfer of private companies and other real-world issues. It will become a regular course that brings together all of the things that students have learned about investment management and deploys it to help individuals. There are several colleges out there that have good CFP programs, but we decided not to focus on that. We are more focused on the appropriate portfolio for different types of client segments.
2. What's the demand like from students?
I don't see many interested in the wealth management side. In the undergraduate world, most are interested in fundamental analysis, using fundamental information to predict what the stock price should be and whether you should buy or sell the stock. Everybody is seduced by the sexiness of asset management. Those are very high-paying, non-incentive-based positions.
3. How are you looking to boost interest?
My job coming from the real world of advising is to say, 'Wait, you're overlooking a major part of this industry that needs you.' The mutual fund industry is shrinking. ETFs and passive management are the future. We're going to need fewer CFAs, and we're going to have less people putting money into actively managed funds. There are not going to be enough jobs for all these people down the road, whereas the advisor business has a projected gap as high as 300,000 positions to fill. That's a huge opportunity, assuming the entire advisory workforce is approximately one million. It's a great job market for our best students today. Look at the average age of advisors. They're all planning to retire and sell their practice, but who are they going to sell it to? Part of what I'm doing is outside the classroom. This fall, I'm taking students to New York City, and most firms we're visiting have a strong advisory business. I'll say, 'I know you think you want to be fund managers, but take a look at what these people do and understand this is really helping people.' Society has a retirement crisis; society has a savings crisis. Here's a chance to get into a business that really does help people.
4. What are the firms doing to train advisors?
We've really come full cycle there. It used to be that all the major firms had training programs. In those training programsI used to call them "friends and family programs"they'd give you basic product knowledge, basic sales knowledge, and they'd expect you to sell to your friends and family. And out of every group of 30 trainees, one or two would continue on with the firm. That's very expensive and not very efficient. So when we got into a downturn in 2000 and again in 2008, most firms killed training programs and became more about stealing experienced advisors from other firms. Well, that got very expensive very fast, and a lot of firms are now rethinking training. Not all these training programs are aimed at college students. Many want accountants and lawyers, people with advanced degrees who already have professional contacts.
5. Could this change the way firms train new advisors?
If colleges could train people to the point where a firm didn't have to have a training program or could have a "training program lite," think about the advantage for those firms. They'd have to spend a lot less, and they'd have a much lower washout rate. Yes, they'd have to train new advisors on finesse and how to talk to clients, but they wouldn't have to train them on estate planning. These advisors who have been going from one firm to another are pure gunslingers. They have no loyalty. Especially in a bad job market, if a firm takes on 20 or 200 out of college, those kids are going to be super loyal.