FWR spoke to Justin Fulton, principal at Signature, about the firm’s conscious effort in building out its advisor force in a way that reflects the industry’s highly talked-about shifting age demographics.

Virginia-based family wealth advisor Signature, with $3 billion of AuM across 170 families, is quite unique in a sense that its client base is predominantly (around 85 per cent) comprised of first generation “sudden liquidity” wealth, although client ages vary depending on the circumstances of wealth creation.

Family Wealth Report spoke to Justin Fulton, principal at Signature, about the firm’s conscious effort in building out its advisor workforce in a way that reflects the industry’s highly talked-about shifting age demographics.

At a time when much noise is being made about the issue of a lack of succession planning among advisors edging closer to retirement, Fulton said that half of Signature’s advisors are under the age of 40. 

“One of the things we’ve been very intentional about at Signature is to ensure we’ve got a broad depth of age in our client advisors while preparing ourselves for working with the next generation,” Fulton said. “When we bring on a first generation wealth creator we want to be able to work with the family for 50 years or more, and that obviously includes multiple generations.”

SEI and FP Transitions recently published a white paper, entitled Acquisition and Succession: Shift Your Focus from Retirement to Growth, stating that “succession planning isn’t just about figuring out who’s going to take over when you’re gone.”

Rather, it’s about “building a business that will support your long-term vision, and which will continue to serve clients even when you’re not around as much,” said David Grau, president of FP Transitions. “Whether that means preparing the firm for acquisition or extending ownership to the next generation, continued growth is essential to a successful transition.”

But crucially, the issue isn’t being picked up on solely by advisors - end-clients themselves are starting to voice concerns about their advisor’s succession plans.

Fulton said Signature is “constantly” hiring people in their 20s as client associates initially but who can – while supporting the team – learn the ropes and become the firm’s relationship managers of the future.

On that note, Fulton added that Signature makes a point of sending its advisor teams into family meetings so that the family can see the varying ages of those serving them and thus feel confident that they – and their children - are going to be taken care of for generations.

Having already questioned some of the firm’s clients on the matter, he is confident that this is “definitely something which is on their [clients’] minds.”

End-clients asking questions

“One of the questions we get as an independent firm - even though we are quite large for an independent firm - is about the succession plan for our business,” he said.

According to a study by Pershing last year, firms are “hard-pressed to develop a new generation of advisors.” It found that two-thirds of independent firms don’t have an adequate succession plan in place and 31 per cent don’t offer career paths of “any type.”

When asked by this publication why he thinks so few advisors have a succession plan in place, Scott Curtis of Raymond James likened it to clients with children who haven’t established a will.

“Everyone knows it’s the right thing to do,” he previously told this publication. “Establishing a succession document requires close to the same careful thought and consideration as drawing up a will because you are, in essence, putting down in a legal document what is going to happen to your practice and your clients in any unanticipated event that might prevent you from being able to communicate and manage your business.”

Challenges

If gray hairs lend an advisor an aura of authority, when and how should being youthful and “current” be emphasized?

Fulton himself has been in the wealth management space for 17 years and is in his late 30s. From his experience working with older clients in their 60s, for example, he said one of the challenges is that he has to “prove competence.”

He acknowledged that there is certainly a “generational ease” when working with clients in their 30s or 40s. “They use younger communication tools so sometimes they appreciate having a younger advisor,” he said. “It’s also a bit more natural at that stage of their lives.”

Regardless of the age disparity between an advisor and client, the perceived shifting age demographics in the industry is an opportunity for younger advisors to showcase their energy and knowledge of the latest financial planning techniques and tax law changes, for example. They should also capitalize on the fact that many clients will take comfort in knowing that this means they'll be around for years to come.

The issue of an aging advisor workforce is complex and in part relates to the fact that senior people are often more experienced and skilled. It is also worth nothing that, as today’s cohort of advisors age, so too are many of their clients. Equally, it’s important because the next – and indeed current - generation of advisors must adapt to clients’ changing financial needs, expectations and objectives.

The wealth management landscape is undoubtedly changing, and so too will the demographic of those working in it. With the next generation of advisors around the corner – and coming into force today - it is up to individual firms to ensure the transition is seamless and approached in a way that is least disruptive possible to their operations, clients and long-term value.

Fulton believes that Signature is unique in its approach on this, highlighting that - besides the other aforementioned efforts - the firm has recruited communication coaches to enhance the way it works with clients and ensure it can be flexible with their needs – sometimes as it relates to age but often it’s quite simply just to do with personality.