One of the most illustrious names on Wall Street and a regular guest on The Compound and Friends asked me to take a meeting with his daughter a few months ago. She’s a sophomore at one of the top business schools in America.

This is the kind of kid who spends her winters competing to get into the top internship programs on The Street. The kind of kid who spends her summers impressing everyone she meets while at these internships and making the connections necessary to secure a six-figure starting salary right out of school. With her father’s renown and relationships, she could probably go anywhere - Blackstone, BlackRock, Goldman, Millennium, Point72, you name it. She could go into banking, mergers, derivatives, credit, fixed income, research - the world of finance is her oyster. Anyone would hire her for virtually any role.

So I was blown away when she told me that what she really wants - with all that opportunity in front of her - is to work in wealth management. “Really?” Yes. I want to be in wealth.

Fifteen years ago this would not have been the case. Maybe even five years ago. And she’s not alone. I am hearing and seeing this everywhere I look now. The best and the brightest have their eyes trained on us and what we do. Financial planning, a once sleepy little corner of the financial services industry, is about to see something entirely new. The ramifications of this Ivy League influx into the world of wealth management haven’t dawned on the majority of its constituents just yet. Consider what I am about to tell you as your official head’s up.

Megafauna

Did you know there used to be Dire Wolves in North America? They’re not just mythological creatures from Game of Thrones. They’re not just something Robert Hunter dreamed up while writing songs for the Grateful Dead. They lived all over our continent. Up until about 13,000 years ago. And then, in the blink of an eye, they were extinct. We have their smaller, less physically impressive cousins here with us in our forests but the megafauna version of the modern wolf is long gone.

Have a look at the graphic below and you can see a whole cornucopia of these forgotten titans of the North American landscape:

They found the remains of this Giant Ground Sloth in the La Brea tar pits in Los Angeles. How did it get its name? Thomas Jefferson was presented with a giant claw that had been unearthed during the digging of an irrigation trench in Holmes County, Ohio. He asked the explorers Lewis and Clark to go off in search of the massive lion it must have belonged to. As the rest of the skeleton was unearthed, he realized it must have belonged to some other sort of creature, and thus it was named the Megalonyx jeffersonii, now more commonly referred as Jefferson’s Ground Sloth or the Jeff. This particular beast was ten feet long and weighed something like 3,000 pounds. The modern-day version is between 2 and 2.5 feet long, weighing in at just 8 to 17 pounds.

Sidebar: Our founding fathers Thomas Jefferson, Benjamin Franklin, Alexander Hamilton and George Washington were wholly unaware of the fact that dinosaurs once existed. The first documented discovery of a dinosaur hadn’t occurred until William Buckland unearthed one and described it in 1824. The term “dinosaur” itself didn’t come into usage until Richard Owen coined it in 1841. Future president Ulysses S. Grant was two years old when Buckland made his discovery. Grover Cleveland was 5 at the time Owen published his book “Dinosauria” in 1842. The men who created America were utterly unaware of their existence.

Anyway, after the dinosaurs had been killed off by a combination of meteor strikes, ice ages and other natural causes, there was an era in which enormous mammalian and reptilian megafauna dominated the North American continent for a million years. And then another natural disaster came along about 13,000 years ago which wiped them all out: Mankind.

As humans began to cross the land bridge from Asia into North America, the large animals they encountered didn’t stand a chance. The saber-toothed cats and short-faced bears, the majestic mastodons and mammoths had never evolved the kind of defenses needed to co-exist with men and, as a result, they quickly became lunchmeat as human civilization took hold. This happened everywhere on earth where humans suddenly showed up, surprising an animal population that had not co-developed with early man - Australia, the islands of Japan, South America and, yes, New Jersey. One by one, these places saw the end of their local megafauna.

Except in Africa. It’s the last place on earth you can go to see dozens of species of megafauna in their original habitats - elephants, rhinos, hippos, giraffes - very much alive, unlike the mastodons and the ancient bison and the dire wolves of old. There are no safaris in North America or in Europe because only in Africa did the megafauna evolve alongside our distant ancestors. Climate change certainly reduced the population of Pleistocene-era megafauna, but the shock arrival of human hunters with fire, tools and weapons most certainly finished them off.

What’s coming

The once-dominant massive animals I’ve described above hadn’t had the chance to co-evolve with the newer, stronger, smarter predator that came along. Nobody rang a bell to warn them. And even if they had, it was already too late for these species to adapt to the new scourge coming into their ecosystem. In the realm of wealth management, we’re about to see something similar play out and I want to tell you the story now before it’s too late.

Because there is a species of high-functioning, Type A, prestigiously-educated financial advisor now being bred and soon to be released into the RIA ecosystem that I don’t think we’re all ready for as things currently stand. The next wave of entrants into the wealth management industry are very different than those who have come before. They’re the kids who graduated high school with honors, having had a dozen AP classes under their belts and all manner of rigorous coursework in the top universities across the country. In prior generations, none of them would have ever even considered wealth management as a vocation, largely because the profession barely existed until recently. These are the kids who previously would have been headed directly into the investment banking gulags of Wall Street, working 80 to 100 hours per week with dreams of becoming a dealmaker or a trading phenom, ultimately destined for a career in M&A, underwriting, hedge funds or conquering the corporate climb at firms like Goldman Sachs and JPMorgan.

But now they’re increasingly coming here. And I don’t think our industry’s current megafauna have developed the defenses to compete with kids like these. We’ve never had to. Our present population of former Merrill Lynch stockbrokers, Fidelity call center phone-answerers and Ameriprise insurance salesmen haven’t had the chance (or the need) to have adapted to a level of competition like what’s about to happen. The kids who would have once been turned loose on the asset management and investment banking world in the past are now being turned loose on ours.

I have met this new breed of hunters and (asset) gatherers. In many cases, they are the children of family friends in search of internships or a foot in the door. When I look at their resumes and the degrees they are graduating with, I almost can’t believe that their first choice is to come directly into wealth management. But wealth management has recently become the very best business in all of financial services. It’s where the greatest and most consistent growth is taking place. On Wall Street, every bank routinely tells the analysts who cover their firm that wealth is their “crown jewel” or their most reliable engine for future growth.

Don’t believe me? Grab the most recent earnings call transcripts from JPMorgan, Morgan Stanley, UBS, Goldman Sachs and, yes, even Citi. They’re all singing from the same hymn book. Investment banking is highly cyclical, trading profits are mercurial, M&A is capricious, mutual fund fees are a melting ice cube and private equity / credit are dominated by non-bank entities, untethered to the post-crisis regulations that have hamstrung traditional Wall Street lending operations.

But wealth. Wealth is on fire. It is growing rapidly. It is highly in-demand demographically. It is remarkably steady. The customers prize service and expertise and they pay - regardless of market conditions or political regimes. Redemptions and churn are low. You can set your watch by the consistency of the wealth business. If you’re a Wall Street CEO, you can budget based on it. You know the revenue is coming in because you know the need for advice never goes away. It’s the apple of your eye when you survey the various divisions you are overseeing from your Herman Miller chair. It’s no surprise The Street has fallen in love with it, transitioning its existing brokerage salesforce into a wealth management infantry, supported by asset management air support and an armada of lending and capital markets solutions moored just off the coast.

And to support these efforts, they’re going to need legions. Kids from the Universities of Michigan and Penn, from Cornell and Indiana’s Kelly School of Business. They’re pulling the best of the best and, rather than grooming them all for banking jobs, they’re sending them here. To wealth. And while the kids are just getting their feet under them today, tomorrow they’ll be hunting.

Today’s population of CFPs and financial advisors have flourished in an environment in which they’re not competing with the alpha kids who dominated the schools they attended in their youth. Up until today, success in the wealth business has primarily come as a consequence of one’s ability to be serious, empathetic and a really good “people person.” Billions of dollars worth of firm equity value have been created as a consequence of this unique set of skills and virtues. It was enough to be engaging with prospects, have an impressive command of the tax consequences of building a portfolio and to truly care about the person on the other side of the table. We have done an outstanding job for our clients, as an industry, with high levels of customer satisfaction and job satisfaction. But this success has attracted attention at the top rung of the food chain. First, from private equity, attracted as they are to big profits and consistent cash flow. And now, by the most successful students coming from the top universities in America. Our cottage industry world of thriving lifestyle practices and one- and two-person shops has been discovered. Everyone wants in.

And yes, at the vanguard of that everyone is going to be a large crop of apex boys and girls we’ve never had to contend with in this business. And when they grow up, they’re going to be hungry. They’re going to eat some of you. It’s not your fault - you’ve never encountered the likes of them yet.

Associates

Two summers ago we met a kid in Austin, Texas who had spent three years at UBS as part of a new financial planning program internally at the bank. UBS has one of the largest wealth management units among the big banks by both headcount and assets under management. It’s the combination of their own homegrown efforts to convert banking clients to wealth clients and the enormous PaineWebber brokerage salesforce they swallowed up at the end of the 1990’s plus a helping of advisors who jumped aboard as the SS Credit Suisse sunk beneath the waves earlier this decade. It’s a formidable firm with one big, glaring weakness - the corner office “producers” are mostly former brokers. Relationship guys and stock jockeys. Not financial planners. Not people who went into this business with the intent to practice modern wealth management as it is currently practiced.

They’ve spent decades learning to sell products, funds and strategies, sometimes even positioning themselves in the eyes of their clients as stock-picking portfolio managers. UBS can’t let them go because the clients’ loyalty is to them and not to Switzerland. They also can’t change them. They are who they are. UBS, like Morgan Stanley and Bank of America, has learned all about the “sticky” primacy of financial planning in the retail wealth channel. But they also know that it’s the sales-y relationship guys whose revenue and AUM growth keeps the lights on. So rather than try to teach old dogs new tricks, they’ve brought in some new dogs. Kids who have been schooled in creating financial plans and implementing them for high net worth households. These kids are the new breed of “associate financial planners” who are sent out throughout the country to meet with producers and teams of producers and support their asset management efforts with a dollop of planning. They show up in meetings with the main advisor and “take it from here.” They start asking financial planning questions that the clients have never been asked before. They start introducing financial planning topics into the conversation and, in many cases, building actual plans for these households.

Some of the traditional brokers-turned-advisors have embraced this idea and fully integrated it into their practices. They welcome the arrival of the planning kids in their branches and enthusiastically include them in meetings. Some scoff at it and, according to the planning kid we met in Texas, politely inform them that they are not needed and can only cause confusion. If a producer has even an inkling that something said in one of these planning sessions may cause a client to second-guess the advice they’ve been getting all along or - worse yet - the current portfolio components - that producer will not be exposing his or her hard-won relationships to this financial planning mumbo jumbo under any circumstances. No thank you, we’re all set, go to your next stop.

The Texas planner told us he had worked on 200 financial plans that year and that he was eventually going to be leaving the bank to start his own firm or, at least, his own practice at an independent RIA. That’s what he was auditioning for in his request to meet with us. And I have to tell you, 200 financial plans in a year is an astounding amount of at-bats for a 26 year old. Three or four years of that sort of on-the-ground training is going to produce an absolute killer if combined with an outgoing personality and a modicum of entrepreneurial courage. The typical associate financial planner at an RIA might - if they’re lucky - get 10 or 20 at-bats in the course of a year. Typically, today’s RIA firms simply do not have the stock or the flow to provide hundreds of these opportunities to hone one’s skill with an actual family in need of help.

Now, I want you to imagine that there are thousands of these “associate financial planners” being sent out into the world by wirehouse brokerages-turned-wealth management businesses all across America. They were student athletes and valedictorians. They were recruited from the finest schools. They’re accumulating tens of thousands of at-bats every month, getting sharper, stronger and more accomplished with every passing day. They’re working in kill-or-be-killed conditions, not Northwest Mutual, not Schwab storefronts. Some of them will get bolted on to a team at Morgan or UBS full-time but many of them will end up striking out on their own. They will be coming into your neck of the woods having had a lot of practice. They’ll have chops, if you will. They’ll be starving and willing to go to lengths to attain clients that the associate advisors in the cozy homes you’ve built for them may not be. They’re not house cats. They’re jungle cats. Lions and tigers. And while there are plenty of multi-million dollar households to cater to, it’s not an infinite amount. There’s a point at which you’re going to feel it. This next wave of wealth management talent is not going to content itself with building a lifestyle practice and shuffling off to the golf course. These are the type of people who build and staff carnivorous organizations that eventually grow up to be empires. And in a business of compounding advantage (which is what this is), empires attract talent, capital, resources and consumer mindshare. In the act of attracting it, they remove it from others.

Good luck out there and build some natural defenses. Adapt and evolve. Prepare. Because you can’t stop what’s coming.

Future Proof Miami

Huge thanks to all of you who came out to support our first-ever Future Proof Citywide on the ocean in Miami Beach. Something like 2500 professionals from the wealth management industry gathered for three days of insights, perspective, technology demos and networking in one of the most beautiful cities in the country. Epic does not even begin to describe it. And everyone there is thinking of surviving and thriving - becoming Future Proof. We know what’s coming. We’re adapting. We’re preparing. As a community.

You’ve probably seen a thousand pictures of what took place on social media last week. Maybe you’re already planning to make it out to the Festival we do in California each September. I have some pics of my own to share below but I promise you the pics don’t do it justice. Being there among the most talented, forward-thinking and creative advisors in our business was like a dream. A dream we helped make a reality. If you work in this industry, I’ll see you at the next one.

Okay, that’s it from me. Talk soon! - Josh