The population of financial advisors is expected to decline through 2016, according to a new research forecast.
Cerulli Associates discloses this finding in the latest edition of “The Cerulli Edge: Advisor Edition.” The second quarter 2013 report explores trends impacting the recruitment, training and retention of advisors.
The report forecasts that advisor headcount will decline by a five-year compounded annual growth rate of -1.2 percent. The study pegs the number of advisors in 2016 at 298,000, down from an estimated 309,000 at year-end 2012.
“During the past year, advisor headcount has declined by 1.3 percent due to terminations, retirements and advisors exiting the industry by choice,” the report states. “Cerulli projects that advisor contraction will continue through 2016, with headcount falling by 18,600. With a shrinking pool of talent, retention of quality advisors will be at a premium and the costs of securing outside talent will inflate.”
While projecting an overall decline in the advisor population, the report forecasts significant five-year compounded annual growth rate increases in specific advisor channels. Among these are registered investment advisors, dually registered advisors and bank broker-dealers:
- 5.3 percent — Dually registered advisors
- 4.9 percent — RIAs (including dually registered)
- 4.7 percent — RIAs
- 1.5 percent — Bank broker-dealers
The advisor channels forecasted to have negative five-year CAGRs include the following:
- -5.0 percent — IBDs
- -2.7 percent — IBDs (including dually registered)
- -1.5 percent — Insurance B-Ds
- -1.3 percent — Regional B-Ds
Given an estimated conversion rate of 25 percent — the proportion of new advisor trainees who transition to “successful trainees,” the report adds that the industry will lose advisors to retirement faster than it replaces them with new talent. According to Cerulli, the attrition rate (successful trainees less new retirees) by distribution channel in 2012 was as follows:
- -2.7 percent — Independent B-Ds
- -2.5 percent — Regional B-Ds
- -2.2 percent — Dually registered
- -2.2 percent — RIAs
- -1.1 percent — bank B-Ds
- -0.9 percent — Insurance B-Ds
- -0.8 percent — wirehouses