I have worked in the industry for over 20 years, and it still amazes me that the estimated failure rate of new advisors remains at an excessively high level of near 80 percent in the early years. What other “professional” industry has such a high rate of failure?
The estimated cost for training a new advisor hovers in the $200,000 range, so it has to impact the bottom line of the firms to continue to operate in this manner. Why hasn’t this improved over the years? Is the high level of skepticism held by the investing public towards advisors related to the fact that so many are “here today and gone tomorrow?”
The other aspect of new hiring growth that has always puzzled me is that most firms expect an advisor to begin to show immediate results, in terms of assets and revenue, yet advocate building long-term relationships with their clients. If you are commission-based and your job is at risk, isn’t that in conflict with the ability to build a long-term relationship?
Just look at the advisors at one major wirehouse that has eliminated about 1,500 reps this year alone, almost 500 of which were in the new-hire training program.
I think our industry needs to seriously re-evaluate the training programs and the method of compensation to ensure that they are building relationships with competent advisors who, in turn, are able to build long-term relationships with clients.
Of course, my niche as a coach is the new advisor seeking to beat the failure rate of 80 percent in the early years and break the magical $500,000 level, so I see the opportunity in this crisis. However, never before in the history of our nation have so many needed a competent and trusted advisor, and I am not real confident that we, as an industry, are doing enough to meet this need. I am trying to do my part as a coach, but a lot more is needed.
William F. Cole, CFP
President, The Complete Financial Advisor
Signal Mountain, Tenn.