Financial advisors managing trillions of dollars in assets are preparing for retirement soon, and new talent has become a key commodity in wealth management.
But those new to the industry don’t see it as a welcoming place.
a New Report by Industry Research Firm Ceruri Associates estimates that by 2022, more than 72% of early-career “rookie” advisors within three years of their role will have failed and left the role. Despite adding 18,207 new trainees last year, the industry lost 13,169 of them, Serli said in a report. Monday press release.
In addition, considering the 2,459 retired advisors, the company added only a net estimate of 2,579 new advisors last year, Ceruli said, a figure that “barely offsets” advisor retirements.In other words, the emergence of wealth management as an industry Heading for the Great Inheritance Cliff — unless you turn around immediately.
“The industry is facing a crisis of declining advisor turnover,” Ceruli research analyst Steven Caruso said in an interview. “There has been a significant increase in the number of advisors retiring, and the number is increasing due to: Successor Crisis, the industry as a whole needs to introduce more advisors. ”
As of 2021, about $2.4 trillion, or 8% of industry assets, were managed by advisers who were due to retire within the next five years, according to Cerulli. As of 2021, nearly 37% of all advisors plan to retire within the next 10 years, but more than a quarter of them, 26.3%, were unsure of their succession plans.
“Where rubber hits the road”
By investing early in a strong talent pipeline, recruiting more broadly, and devoting additional resources to developing younger talent, financial advisors are positioned for long-term success and a smooth transition to retirement one day. can be adjusted. But industry recruiter Jason Diamond said that’s a challenge for many people who focus on immediate profit.
“Literally every day, we get calls from advisors and companies saying they need additional resources, they need an advisor to free up capacity,” said Diamond, vice president and senior consultant at Diamond Consultants in Morristown, New Jersey. I will come,” he said. .
“But when rubber faces reality, unfortunately people like the ones we are talking about are going to have negative returns, at least for a period of time…and many companies and advisors are unwilling to accept that. ”
Diamond said he has typically seen advisers take at least three years build enough connections And the asset base, and often takes five to seven years, to bring benefits to the employer. That tends to be the turning point once an advisor’s income hits about $200,000, but it’s $30 million, although it’s important to keep in mind that employers may retain about 40% of it. Diamond estimated that it meant managing more than $50 million in assets from .
“It’s a lot of money. It’s hard to do and it takes time, especially for young people who don’t have an extensive network of wealthy individuals to tap into,” he said.
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Serulli’s report states that 69% of new advisors are expected to build their entire client base from scratch. So many advisors find themselves in a catch-22 situation where they need wealth and high net worth connections to get started, but can’t get the help to acquire it. off the ground. 45% of new hires said they manage a small account under a senior advisor, which could serve as a means of transitioning to a larger account, although some newcomers wondered how that transition would It doesn’t seem to have received a clear message as to what will be done.
“A well-structured training program should transition new advisors into production in stages, providing a natural progression of their roles and responsibilities,” Ceruri said in the report.
But these so-called “newcomers” are almost always already highly skilled professionals with valuable experience, Seruri found.
The report said that “only 15% of newcomers report that financial advisors were their first career,” adding that only 43% had previously worked in financial services. The average age of new hires is he is 37, many of whom already have experience in sales, marketing and investing. While the role of financial advisor has historically been sales-focused, overall, most newcomers (84%) choose this role because they want to help others reach their financial goals. Ceruri found that he was drawn to the profession.
Maintain a professional career in financial planning
Correspondingly, the biggest training newcomers wanted more was financial planning, not sales.
“71% of new advisors consider financial planning training to be very important, but only 47% feel very satisfied with their company’s support on the subject,” said Cerulli. said in the report. “this Financial planning training This is by far the biggest gap and a key area for companies to invest in as they improve their new advisor development programs. ”
Shawn Tydlaska, Burlingame, Calif.-based financial planner, founder and CEO of a registered investment advisory firm Ballast point financial plansaid it believes the industry has a “moral duty” to help develop the next generation of financial planners.
“As planners, we want to help people with their personal money stressors, so the more people in this profession, the better,” he said.
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Mr. Tidraska has been training advisors in his own practice for two years in an apprentice residency model, and at the end of the two years he will be licensed as a Certified Financial Planner, helping him work independently with his clients. He said that is the goal. .
“From day one, they’ve been in customer meetings, taking notes, learning,” he said.
Tydlaska — co-founder of BLX Internship Program or Fee-Only Clinic Helps Build Career Pipeline for Young Black and Latino Advisors— said there is also a business case for supporting diverse advisors, often from wealthy and less economical communities. Potentially fewer connections to start jobs.
“The future is diverse,” said Tidraska. America’s wealth face is expected to diversify The population is headed toward “majority minority by 2045”.
“So they’re planners serving your customers,” he said.