Twenty years ago, it was assumed that successful financial advisers wanted to own their own firms.
And while plenty of young people still do, at least some are reassessing that career path. Part of it has to do with young advisers' seeing how their bosses struggled through the financial crisis and recession.
Buying into a firm also can be expensive and may require young advisers to take on unwanted debt. As for young advisers' starting their own firms, established owners said that with the Internet and tougher privacy laws, it is much harder than it was years ago.
The trend is potentially troublesome for owners of financial advisory firms who have been banking on selling their businesses to junior advisers.
"We've talked in concept with some of our folks about passing on the reins over the next 10 years or so, and we've gotten a little push-back," said Marjorie Fox, chief executive of Fox Joss & Yankee LLC.
She understands their reluctance.
During the recession, Fox watched as owners declined to take profit distributions and even salaries for a period.
"If [potential owners] felt the bear market experience, they saw the risk before the return, and any prudent person would think twice before seeking that," she said. "No one should look at ownership with illusions, that it's all gain and no pain."
Today's advisory industry also pays higher salaries for young, talented advisers, Fox said.
Therefore, many think that they can make enough money from their base pay and incentive compensation without taking on the risk of ownership, she said.
The data are mixed on how young people feel about firm ownership.
In a recent poll by Workforce sister publication InvestmentNews of 104 young people planning to enter the financial advisory business, 70 percent said that they would like to own their own firm. But just 36 percent ranked employee stock ownership or an ownership path as one of the top three incentives that a financial advisory firm could offer them.
These so-called NextGen advisers ranked the following enticements as more important: profit sharing or bonuses, flexible hours, high relative pay and cutting-edge technology.
Jennifer Quigley, 35, an adviser with Sullivan, Bruyette, Speros & Blayney Inc., has no aspirations to own her own firm.
"I feel I could have a full career without having ownership," she said. "Stock isn't something I need to feel fulfilled in my job."
Quigley, who graduated from Catholic University and earned her certified financial planning credential through Virginia Commonwealth University's CFP program, enjoys working with clients and knows that an ownership stake would require her to spend time behind the scenes running the firm.
At HFS Wealth Advisors LLC, just two of its four advisers have expressed interest in eventually sharing an ownership stake in the firm, president Patrick Hammer said.
He thinks that apathy about ownership is a growing trend in the business and that it isn't necessarily a negative development.
"As independent firms evolve and grow, I think we'll see more people falling into an employment role rather than as a partner," Hammer said. "It's important that we know what we're good at and what we're not good at, and some people would be bad at being a manager or owner."
The world has changed in the two decades since many independent advisory firms were established, Hammer said.
With today's no-call lists and the ability of potential clients to research their own investments online, it is more difficult for young advisers to build up a business.
"I don't know if I could do it today," said Hammer, who owns the 11-year-old HFS with two other advisers. "I would have to find a firm and say, "Would you give me a job?'"
Most advisers would like to own stock in their firms, but they don't want to give up too much to get it, said Eric Schwartz, chief executive of Cambridge Investment Research Inc.
Many advisers don't want to be forced to accept a lower salary to buy into the firm, and some balk when it comes time to sign loan papers strapping them with hundreds of thousands or even millions of dollars in debt, he said.
"All of a sudden, they realize that this could bankrupt them," Schwartz said.
Advisory firm founders often are surprised that their advisers aren't eager to own a stake.
"If you are a true entrepreneur, you are shocked and amazed at how little people value stock in a company, versus cash in the hand today," Schwartz said. "I suspect many [registered investment advisers] are shocked and, in some cases, insulted."
Ownership deals can be structured in ways that make it less scary to the buyers, such as making the debt non-recourse and spreading out the transfer of ownership over time. Schwartz said.
Fox Joss & Yankee is still working on how its three owners will pass on their stakes in the advisory firm. One thing that they have decided is to require their professionals to have some ownership in the company before they can be a candidate for the manager's board.
"We need them to have ownership to have a say in management," Fox said. "We don't want them making management decisions unless they have skin in the game."