Advisory firms must rethink their traditional fee-based models if they hope to attract young talent, according to Alan Moore, chief executive of XY Planning Network.
Moore, whose firm aims to recruit advisors committed to serving younger clients, said that RIAs have to temper their expectations when hiring young advisors, as the fee-based model is not always conducive to them building up a client base.
‘If you’re looking at hiring someone in their 20s to bring in millionaire 65-year-olds, you will fail,’ Moore said at TD Ameritrade’s National LINC Conference in San Diego, California.
Instead, he argued that younger advisors are best matched with younger clientele. For that to work, advisors have to change their service model to suit the next generation of clients, he said.
‘Look at your niche market and try to figure out the right service model and fee structure that works for those clients. It will be different than the fee model that you use with your older clients,’ Moore said.
While an asset-based fee structure may work for older clients because they have higher overall assets, advisors working with young professionals such as doctors and lawyers may find that an income-based fee model makes more sense.
‘All of our advisors charge differently, whether monthly, by subscription or a retainer fee. Sometimes it’s quarterly, sometimes it’s a flat fee, sometimes it’s based on income and sometimes net worth and income,’ Moore said.
Moore also touched on the importance of offering paid internships and salaried positions to recent graduates to attract a younger workforce. This will help firms connect and communicate with the next generation of clients, he argued.
‘It has to be a salaried position coming out of school, and you really should be able to find a way to make another $50,000 to $60,000 for someone coming out of school. Come on, that’s one client for you guys,’ Moore said.