The young financial planners I’ve met who are interested in targeting millennials generally fall into one of two categories:
1. Entrepreneurs, trying to figure out how to build a sustainable business serving younger investors
2. Junior advisors, trying to figure out how to serve younger investors while working at a traditional wealth management firm
There are risks associated with both. Entrepreneurs have more opportunity for reward, but greater risk they might just fall flat on their faces. On the other hand, if you’re a junior advisor playing it safe, not taking any risk, there’s less opportunity for reward.
Somewhere in the middle are the “intrapreneurs,” who have the opportunity to build a new line of business (like an entrepreneur), while operating within the context of a more established firm (like a junior advisor).
Does intrapreneurship offer reward without the risk? Not exactly. If you ask anyone in the investment world, they’ll tell you that’s never really possible with anything. The risks associated with entrepreneurship are certainly mitigated to some extent; however, intrapreneurship does present its own challenges.
I want to tell you about Matt Cosgriff, the financial planner who entered the intrapreneurial world by convincing a traditional advisory firm to allow him to build his own line of business targeting Generation Y and Generation X investors.
Matt began his journey:
• As a 25-year-old studying for his CFP®
• Working as a junior advisor at a boutique wealth management firm (before quitting), inspired by the idea that he would start his own firm focused on younger professionals
• Building out his business plan and counting the funds he had available
• Wondering if he had pulled the trigger on going out on his own too soon (a thought most first-time entrepreneurs ponder)
And then he made his move.
Making the pitch
Matt reconnected with another advisor he knew in the industry and told him about his idea. The advisor saw the potential Matt’s business could bring to the firm he worked at from a sustainability standpoint, since none of the advisors there were interested in younger clientele. After some discussions about what this might look like, the advisor advocated bringing Matt in to pitch the idea to the management team.
From Matt’s standpoint, the pitch was easy:
‘Your clients are aging. Your book is probably decumulating. You need to complement your book with younger clients who are accumulating. This is the key to sustainability for your firm.’
Obviously, much more went into it than that. Matt spent a lot of time researching stats to support his case and putting together a business case, describing what it would take to make it happen and the potential it could bring. Most importantly, Matt spent a lot of time garnering buy-in. Why would this firm pay his salary, cover his business expenses, and take on all the risk associated with this new business idea?
Luckily, Matt didn’t come to the table empty-handed. He knew he could contribute to the team as a junior advisor while he built this new business line. Because he had something to contribute today that would help them generate revenue now with their existing clients, it helped mitigate risk to develop buy-in. Though still skeptical until they saw results (like any smart investor would be in any start-up), the team was willing to give Matt the support and independence he needed to make his business idea a reality.
Matt’s key success factors:
• Having an advocate within the firm (specifically, within the management team)
• Communicating value with a clear sales pitch and strong business case
• Using his negotiation skills to garner buy-in and win over management
Getting things off the ground.
Many entrepreneurs need some type of “side hustle” to make ends meet while they get their business off the ground. But that can be a major distraction. This was also a challenge for Matt as an intrapreneur; his side hustle was his work as a junior advisor within the firm. But by working long hours and through the support of his firm’s marketing team, Matt was able to spend months refining his product offering.
Let’s pause here. This is something many new business owners (even Matt) come to regret – spending too much time defining the perfect product, when you would’ve been better off starting with something basic and refining it after you’ve gotten real client feedback. Matt recalls spending a lot of time on the on website and product packaging. Looking back, he thinks he could’ve gone faster with something more simple.
Regardless, Matt did finally launch the website and finalize his product. In fact, you can see it for yourself because he makes everything completely transparent and easy-to-follow on his website (something I definitely recommend for anyone looking to gain the trust of those skeptical millennials out there). His business, Lifewise for young professionals, was now a reality.
Matt’s key success factors:
• Hard work and long hours (in addition to his side hustle)
• Resource support from his firm, in terms of business expenses and marketing support
• Autonomy, which the firm gave him to define his own brand and line of business
His advice (with the benefit of hindsight): Start simple and refine later – even if it’s just a simple brochure with services and pricing.
Young and old: Listen up!
Intrapreneurship presents a HUGE opportunity for advisory firms to engage and retain younger financial planners. When you talk to those junior advisors who have gone out on their own as entrepreneurs, they usually only left their old firms because they felt boxed in.
But imagine if management provided the flexibility to those advisors to develop their own offerings within the context of a traditional advisory? The benefits to your advisor business might include:
• Expanding your brand – and your book of business – without diluting it
• Creating loyalty from your young talent who want career development
• Grooming young advisors who act like business owners for future leadership roles
Some food for thought in the new year, as you consider new opportunities for yourself and your firm!
Matt Cosgriff, Lifewise and BerganKDV Wealth Management are not affiliated with SEI.