There’s a massive transition of wealth already underway in the U.S. as older generations retire and new generations set the investing course. Cerulli Associates estimates that 40% of financial industry assets, worth about $10.4 trillion, will roll over in the next decade. That’s 37% of advisors retiring.
This series takes a look at how that transition is already playing out as younger, more diverse advisors take the helm. It also looks at how younger clients with different values steer the direction of capital in the U.S., whether inheriting generational wealth or building it for the first time.
To kick off this series, I talked with Marci Bair, CFP, CEO, President, and founder of Bair Financial Planning as well as Vice President of the Wealth Consulting Group.
Building A Multigenerational Practice
Karrie Gordon, staff writer, VettaFi: Marci, thank you so much for being the inaugural interviewee for this series. I think you have a fantastic perspective on the advisor industry and the transition of wealth that’s only going to pick up steam in the next ten years. First off, let’s get started with a bit about you. Tell me about yourself and your journey to today.
Marci Bair, CFP, CEO, President, and founder of Bair Financial Planning of Bair Financial Planning: Thank you for having me. So I just celebrated 30 years in the industry; I started practicing in 1992 when I was 25 years old. I began as an administrative assistant for a small financial planning firm.
The great thing is that the broker-dealer I worked with was The Advisor Group that owned Calvert Group, a pioneer in the Socially Responsible Investing space, though I didn’t realize it at the time. My first taste of investing was socially responsible, and now I have 30 years of history in that. I’ve been able to watch the evolution of socially responsible investing.
Bair Financial Planning is a full-service, certified financial planning, fee-based firm. We lead with financial planning, and the majority of our clients are also investment clients. Our clientele is primarily LGBTQ+ individuals, in addition to women in leadership.
We’ve had clients for 30-plus years. I have clients that when they started with me, were 30, and now they’re retiring. We’ve been able to go through the full life cycle with them — death, divorces, separations, all kinds of markets, crashes, pandemics, marriages, having children and grandkids. It’s really great having a multigenerational practice.
The Changing Face of Advisorship and Wealth Transference
Gordon: I love this deep well of knowledge and experience that you bring to sustainable investing. I imagine it’s given you a unique perspective of the industry over time. What industry changes have you seen in your time as an advisor?
Bair: I’m actually pretty energized and inspired lately because I’ve been in the industry so long and it has been homogenous for so long. It is really refreshing to see the younger advisors and more diversity, and I really champion that.
I’m on the Advisor Inclusion Council for LPL which is comprised of representatives from each of the diverse advisory groups. I represent the LGBTQ+ group, and then we have a Black advisor group, a Hispanic group, an AAPI group, and a woman-focused group. I’m really inspired by such a large company thinking of innovative ways to bring more diverse advisors into the space and then also supporting them once they’re here.
We know from a succession standpoint, that if you’re a female advisor, for example, a lot of your clients may want to stay with a female advisor. You may want to sell your business to a female advisor, so we need to have some matchmaking and some succession planning going on. That perspective is the same thing with LGBTQ+, you’re going to want somebody that comes in and understands the clientele, the needs, and the community.
We’ve got a great opportunity right now with not only the transfer of wealth but also new advisors coming in and trying to match them with the right type of practice. One where they can learn and grow but then hopefully succeed and take over that practice. It’s seamless for the client and also a really good match on the value side for the client and the firm.
“Build Out the Practice to Support and Reflect Who You Are”
Gordon: That’s a really great point about succession. I know you target historically underserved demographics by catering to LGBTQIA+ clients and women. What drew you to this demographic?
Bair: What attracted me in the first place was just being part of the community to start with. You’re starting your business and you’re looking around and saying “Ok, who would my natural clientele be?” It would be people like me. So I started with a local LGBTQ+ Chamber of Commerce. That’s where a good amount of my clients initially came from, referrals from there. And as a woman CEO including women in leadership was a natural step.
You build out the practice to support and reflect who you are. I think it’s disingenuous when you’re focusing on a certain group but then your investment portfolios might not support that group. It’s an important part of the education I do within different advisor communities. You can invest in traditional ways but your clientele often end up investing their dollars in ways that are counter to exactly who they are and what’s important to them.
Up until the last couple of years, financial advisors never really talked politics or shared who they were and what their values were. I’ve always been an open book and for me, it’s attracted the right type of people.
Younger investors are more interested in what their advisor is all about and may not want the same advisor their parents or grandparents have. Talking about the transfer of wealth, we want to try and keep that generational wealth as it progresses through. We want to also keep those clients as they inherit funds.
It’s incumbent on us to really understand that next generation as well, to have the technology they want, the kind of services they want, in addition to the values and interests that ensure we all align. I think that’s how we’ve been able to reach that next generation.
Younger Investors Choose Sustainable Investing
Gordon: You have great perspective not just on how the financial advisor industry has changed but also on how sustainable investing has changed over time. Tell me a bit more about how you approach investing with your clients.
Bair: We give our clients the option of traditional portfolios as well as portfolios that take into account environmental, social, and governance criteria. Nine times out of 10, clients lean in and say “Hey, that’s exactly what I want” when given the option. We do have some clients that come in already wanting that type of investing. For those that don’t though, once we explain it all to them, they’re all about it.
Back when I started, there were only a handful of companies, mostly large U.S. companies, that catered to ESG priorities. We still had to build out a full portfolio, so only some of it was ESG or SRI, and we framed it as good, better, best. Fast forward to now when there are hundreds of mutual funds and ETFs that are at least somewhat ESG or SRI-focused. It makes it even more challenging for today’s advisor to set up portfolios, and do all the screening and due diligence.
Nine years ago, we teamed up with a group of independent CFPs and Investment Advisors and created The Wealth Consulting Group. It’s our hybrid RIA, and LPL Financial is our broker-dealer. I’m blessed that my business partner, Victor Orozco, does all of the ESG work for us on behalf of our RIA. Victor helps run what we call our “High Impact Portfolios” with our ESG portfolios on behalf of the Wealth Consulting Group advisors.
We also do a lot of advisor education regarding this as a way to attract new clients. It’s also a way to keep clients from leaving out the back door. The majority of our clients, especially senior clients, are not first-time investors. They’re coming to us with assets from another advisor. They wanted this type of investing, but their advisor wouldn’t provide it for them.
It comes back to advisory education as well as investor education. When given the choice though, the investors are definitely choosing sustainable investing, particularly the younger ones.
Sustainable Investing: “It Just Makes Sense” to Clients
Gordon: That’s really interesting, can you tell me more about the ESG component of investing?
Bair: Sure! We tend to start our portfolios off with the tried and true portfolio managers who have been in this arena from day one. That is their focus, and that is their culture. Then we expand upon that, adding in funds that make sense, that may be newer to the market but still fall within the PM’s focus.
It takes a lot of due diligence in this space, especially given greenwashing and rainbowwashing. We also really want the social advocacy side of things, which active managers have. Therefore, we have an actively managed portfolio, an ETF portfolio, and also a stock-based one. And it’s incumbent upon us as advisors to really understand the difference, especially between actively managed and ETFs when it comes to advocacy.
We’re looking at the whole landscape of ESG investing. We’re also obviously looking at those funds and companies that support the LGBTQ+ community and women’s rights, given our clientele. Advisors who are just getting into this space might just do a general ESG screen. From that, they might put together a portfolio that is completely counter to what the client wants. It goes back to knowing your client and knowing the funds and really understanding the screening criteria that go into it.
We also never prejudge anybody when they come into the office. We bring ESG up to everybody, and they all love it. It just makes sense when you lay out that we’re doing financial due diligence on these companies. But then in addition to that, we’re also looking at sustainable and environmental factors, we’re looking at social responsibility and corporate governance. Which one of those do you not want us to use? And then we’ve got the financial data and investment performance to back it up.
I think the younger generations are more keen to be conscious about the companies that they invest in and the causes they support. When it comes to younger clients, they love sustainable investing but they also kind of expect it.
Advice for the Next Generation of Advisors
Gordon: Marci, this has been really fantastic. I just have one last question for you. What advice do you have for advisors who are looking to expand their reach to broader demographics?
Bair: That’s a great question. I think it’s important that our advisors’ practices reflect the communities that they live in. Whether people like it or not, the demographics of America are changing. We’re becoming more diverse with more diverse clientele. So I think it’s incumbent of our advisors to really understand different communities.
Get outside of your norm, and get involved in other Chambers of Commerce. You will find that there are more similarities to you than not. In addition, you can gain additional insight into other communities that you can assist with your Financial Planning and Investment knowledge.
There are not enough LGBTQ+ advisors to serve every LGBTQ+ client. There are not enough Black advisors to serve the whole Black community. We’ve got to be allies to each other’s communities and really understand the needs and concerns of each community to properly serve them.
Money is green in every community, yes, but we still have differences, whether it’s cultural traditions or other differences. We need some cultural competency in each of the different groups. I think advisors can make an amazing practice if they just look outside the narrow focus they may have.
I also think younger advisors should definitely get some designations, like the CFP (Certified Financial Planner) and CSRIC (Chartered SRI Counselor). That helps give them not only the educational components of that knowledge but also some designations to help them stand out. Also, try and partner up or at least get a mentor who’s a little bit more experienced to help bring them under their wing.
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