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The Secret Wirehouse Plan to Replace Aging Advisors … With Their Kids

13.04.2018
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April 4, 2018 – Financial Advisor IQ

Can the adult-age children of wirehouse financial advisors replace their parents – and thereby help the large brokerages cling to their dominance in the asset-management business?

Some wirehouses have taken steps to encourage just such a scenario. At Wells Fargo Advisors, 18% of participants in its apprenticeship program are family members of advisors. UBS also recently launched a program to encourage its advisors to bring their offspring into the business.

For wirehouses, the advantages of hiring advisors’ offspring are numerous. Compared to other recruits, they typically flame out less because they already know something about the business from mom and dad. They are likely to relate well to next-generation clients and they often share a youthful embrace of new technology. As a demographic group, they share the potential to rejuvenate a wirehouse’s advisory population, which is aging across the firms. In the wirehouse channel, 40.7% of advisors plan to retire within the next ten years and that same group manages 39.7% of the channel’s client assets, according to researchers at Cerulli Associates.

Wells Fargo’s success at attracting adult children of its advisors as recruits pleases Kim Ta, senior vice president and director of Teams and Succession Planning for Wells Fargo Advisors.

“Those who have grown up around this industry probably know better than most what the job entails and what it takes,” Ta says. “This business is built around trust. When you work with someone in your family, that trust is there from the beginning,” she says.

Wells Fargo’s apprenticeship program “lends itself to family teams,” Ta says. Under the program, the firm provides compensation to the newcomers for three years while they work with their advisory team. “That allows the team members to focus on the mentorship without having to bear all the costs,” Ta says. “Their son or daughter may get into the practice and see if they’re a fit and that doesn’t immediately hit the wallet,” she says.

Though Wells Fargo does not explicitly target family members for the apprentice program, “a lot apply,” and management responds positively to them, Ta says.

Rainey Hanley, a managing director and investment officer with Wells Fargo Advisors’ San Diego office, liked the idea of her daughter, Ariana Hanley, who graduated from Boston College a few years ago with an economics degree, joining the apprenticeship program.

The elder Hanley’s direct managers also liked adding Ariana to the team. “They thought it was an incredible idea,” the mother recalls.

Ariana definitely knew a significant amount about her mom’s workplace before she entered it as a team member a little more than a year ago. “As I was growing up I became more and more familiar with what she does. I got to see how positively my mom impacted her clients’ lives,” Ariana says.

Her mother and the other members of the advisory team have kept Ariana busy. “We’ve handed over to her our clients’ children,” Rainey says. When her daughter initiates or expands asset management relationships with those contacts, the team shares part of the financial rewards from client development with her — as an incentive. But, while she remains in the apprentice-training program, Wells Fargo pays Ariana’s regular salary without charging the team. The brokerage also engages Ariana and its other apprentices in extensive training and coaching — with an eye that they will bring back to their teams fresh ideas about client development and technology use, Ta says.

Not all adult children of advisors who come to work at the wirehouses stay. Sometimes they come and then the whole family walks. That’s the narrative that ensued after Lester P. Botkin, then an advisor at Morgan Stanley, invited his daughter Sara Botkin to interrupt her music career in New York and join him at the wirehouse. She embraced the idea after living through 9/11 in New York. She was in the lobby of one of the Towers on her way to the 105th floor to work as a temp when the first plane struck.

Six years after she joined Morgan Stanley — in 2007 — Sara and her father welcomed to their team her brother and his son, also named Lester Botkin, who had just completed his military career.

Eight years later – in 2015 – the father and siblings spotted an opportunity to leave Morgan Stanley and seized it. All three decided go independent and affiliate with LPL Financial as Botkin Family Wealth Management in McMurray, Pa. The father, 66, had worked at wirehouses his entire career but he embraced independence – fathomable largely because his daughter and son flanked his sides. “It was definitely easier to do because we set up a family team,” he says.

There are lessons to draw from the Botkins’ story that might help wirehouses stop other family teams from fleeing.

At Morgan Stanley, the family found it hard to capitalize fully on the branding and marketing advantages of being a family team — a bonus for many prospective clients. “It was virtually impossible to market yourself” at the wirehouse, the father says. Since the trio chose independence, the Botkins have extensively promoted their familial togetherness. On their website they describe their advisory team as “a family-owned business dedicated to making a difference in your family’s life.”

The way their former employer structured incentive and payment systems also made it harder for a family operation, Sara says. The family had to balance between the production targets Morgan Stanley set for each member and the credit each of them needed so the payouts would fairly compensate all the Botkins. “It was a stressful event each year,” Sara recalls about the balancing.

Morgan Stanley’s press officer did not return an inquiry about this story by press time.

But Well Fargo’s Ta stresses her wirehouse recognizes the advantages of making it easier for adult-age children to join their parents as financial advisors. The wirehouse will pay them, train them, and make their career transitions “much more approachable,” she says, “They don’t have go and dial for clients in the white pages anymore,” Ta says.

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