COVER STORY
Founders Beware :
Younger Advisors Are Leaving
The next generation of advisors may be looking to find a new firm .
By Stacey McKinnon and Philip Palaveev
ADVISORS OFTEN FEEL THAT WHEN THEY join a firm , there ’ s an implicit promise that someday they will enjoy the lives the firm ’ s founders do . Most of the time it ’ s not something written or even said . It ’ s just human nature to assume that if you follow in someone ’ s footsteps you ’ ll arrive at the same destination . It is also human nature to be angry when you wait in line a long time and find out the last ticket was sold and the show will start without you .
Every firm needs to add , train and motivate successor advisors , but the industry has made slow progress in attracting them , and now it seems to be slipping backwards . The profession ’ s founders ( most of whom started their firms as small practices decades ago ) have been struggling with the idea of giving up control , trusting their teams and selling equity .
Now the next generation may be running out of patience . They aren ’ t going to wait around for years for vague promises of succession , especially in today ’ s environment . There ’ s an emerging marketplace for their talent offering them alternatives . They want skin in the game .
That means the competition for advisors is only going to intensify . And standing in the wings are private equity-backed firms ready to go to battle for talent so they can hit lofty growth targets . What successor advisors want besides better comp- ensation is a larger share of the wealth they ’ re helping create . Most of these advisors have spent five to 10 years serving clients and growing practices but haven ’ t yet been given the partnership opportunity and control that reflects their entrepreneurial efforts . When they leave a firm behind , they ’ re often going in search of a better career path , more of a say at the leadership table , and perhaps a greater sense of fairness .
You have seen the LinkedIn messages : “ Congratulate Lora on her new job !” What the message might as well say is , “ Ask Lora why she left the firm , where she was supposed to be working for the rest of her career .” Or , “ Lora ’ s firm just lost a future star .”
Vague Compensation
Two decades ago , you could tell someone to wait : that they ’ d be rewarded eventually if they just put their head down and worked hard . It ’ s questionable how much that strategy worked then , but it ’ s certainly not going to work now or in the future . Professionals have seen promises broken too many times and don ’ t trust easily . If they don ’ t see a clear opportunity to change their financial position for the better , they are not going to stick around .
Our organization , the G2 Institute , studies compensation for advisors , and for the last five years those in our survey say it ’ s barely changed , even as many founders
ILLUSTRATIONS VIA GETTY IMAGES NOVEMBER 2023 | FINANCIAL ADVISOR MAGAZINE | 35