Advisor headcount to decline through 2016

“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