FA Center: The financial advice business was attracting young professionals. Then the coronavirus pandemic hit

FA Center

Newly minted advisers get creative to stay afloat


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Financial advisers in the U.S. are 50 years old on average, so there’s great interest in attracting the next generation to the field. Many millennials have responded, enrolling in financial planning programs and launching their own practice after graduating.

Now these newcomers are experiencing trial by fire.

Until March, these rookies brimmed with enthusiasm. As markets continued to climb, business boomed. Young planners could envision years of steady growth driven by client referrals and targeted marketing to build their brand.

But in a pandemic, all bets are off. Ambitious plans to expand office space and hire more staff abruptly have shifted to retrenchment and renegotiation of leases, software contracts and other business commitments.

Adjusting to this new normal is challenging for new advisers who may not be able to change direction quickly.

“My experience is a lot of advisers don’t put the same amount of attention to their own business as they do to their clients,” said Mark Schoenbeck, executive vice president at Kestra Financial in Austin, Tex. “They need to practice what they preach: have enough cash reserves on hand, don’t spend more than you bring in and be appropriately staffed, not overstaffed.”

Staffing isn’t a concern for independent planners who operate as solo practitioners. But those who are smart enough to know that cash is king look for bargains. With an eye toward maximizing every dollar of their marketing budget, for example, some advisers are capitalizing on low advertising rates.

Chris Struckhoff, 32, an adviser in Irvine, Calif., realized that pricing for Google Ads had dropped in recent months. So he pounced. “I’ve increased my ad spend on Google and Facebook,” he said. “I’ve found it’s now very cheap to drive traffic to my website. So I’m trying to fill the top of the funnel with new leads.”

When Andrew Langdon, 33, a certified financial planner in Peachtree City, Ga., opened his one-man shop in 2019, he intended to find clients by participating in local events to boost visibility. But those gatherings were canceled.

“There has certainly been a disruption to my practice,” he said. “But I’m able to stay afloat due to having saved about 18 months’ worth of living expenses. It was methodical: I saved a big cash cushion so that I could grow with intentionality and not feel pressure” to add clients. Langdon is now shifting his focus to digital marketing. He just ran his first Facebook ad — creating a video on retirement planning.

Read: As boomers hand over the keys to the stock market, sustainability-minded younger investors let their consciences lead

Even for those advisers who banked on social media to build a following, the current environment poses challenges. Educating potential clients about the value of long-term financial planning holds less appeal with many households under financial duress.

“Our prospect inquiry has gone down 50%,” said Natalie Slagle, a 29-year-old certified financial planner in Rochester, Minn. After co-founding her firm in October 2019, she wrote blogs and raised her online profile to draw people to her website and invite them to book an introductory meeting.

Fee-only advisers who charge clients a set amount (often via a monthly or annual retainer) may not see an immediate dip in their revenue during a steep market drop. But those who earn a percentage of assets under management (AUM) take an instant hit.

“We had hefty projections for the second quarter,” said Joe Weber, 38, an adviser in Tempe, Ariz. “Obviously, they’re all adjusted downward as our AUM fees have fallen.”

Weber remains optimistic about the long-term trajectory of his practice. In addition to working with individuals, he also designs 401(k) plans for privately held corporations and he expects that business to grow over time.

“Things are not dire, but what’s frustrating is we gave four final presentations to prospects in the week before the shutdown,” Weber said. “Three of them were just about to sign the paperwork to come aboard. Now everything’s put on hold.”

More: Scammers are also first responders to the coronavirus pandemic. Here’s how to unmask them

Plus: Make sure the fee you pay an investment adviser fits your portfolio needs

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