A new study by Cerulli Associates is confirming the troublesome trend that fewer young folks are choosing to be financial advisors, and the industry is increasingly relying on a shrinking talent pool. In 2007, just 3% of the advisor force was under the age of 30, according to Cerulli research.
The most recent edition of The Cerulli’s Edge–Advisor Edition reports that while much has changed in the financial industry, recruiting has been slow to catch up. Cerulli says if the industry wants to attract and retain new talent, it needs to focus on programs that steer new advisors onto existing teams.
Undergraduate financial planning programs, Cerulli says, are producing a fresh batch of new talent. “Firms that hire graduates from these programs find that attracting these qualified, motivated, young advisors has become a differentiator for them,” Cerulli says. The Boston-based consulting firm estimates that there are fewer than 100 of these undergraduate programs, and says these programs help students develop technical knowledge and counseling skills through courses on retirement planning, risk management, estate planning, tax law, and exposure to the latest planning technology.
Ceruilli also notes that it’s almost impossible for young graduates entering the planning field to build a book of business these days like their elders did, thus they are attracted to the team-based approach. In more recent years, new entrants have been seeking positions in registered investment advisory firms, not wirehouses, Cerulli notes, because they dislike sales. RIA firms, Cerulli says, “increased their share of new entrants from 2% in the 1990s to 10% in the new millennium.” Increasingly, B/D firms that are willing to take on new graduates in a team-based practice are the independent firms.
Because competition for young graduates is fierce, Cerulli suggests that B/D firms that are serious about recruiting these young folks should offer an internship program and bring in students in their junior year as most of the top-tier students have already been nabbed by their senior year. The typical new recruit is earning a starting salary from $50,000 to $60,000. “With their pick of firms, most of these graduates tend to choose boutique RIA firms or join existing teams at B/D firms that are willing to offer a defined career path and demonstrate a commitment to graduates,” Cerulli says.
Firms that do hire young talent find that “with qualified staff on board, it’s much easier for them to grow,” Cerulli says. Cerulli points to one large RIA firm which said that it’s increasing market share “at the expense of wirehouse firms due, in part, to its cherry-picking the best new talent form financial planning programs.”