The number of advisors in the U.S. grew by 1.1 percent in 2014, the first time since 2005 the headcount had increased, according to Cerulli Associates.
In a report released Monday, Cerulli reported that 308,937 advisors were practicing last year across wirehouse, broker-dealer and RIA channels, up from 305,610 in 2013.
Cerulli predicted that the upward momentum would continue over the next three years. It cautioned, however, that the looming succession cliff would reverse positive growth by 2020.
With a big rise in advisor retirements, the headcount will start to fall again at an even faster rate than in recent years, it said.
According to the report, the number of advisors decreased by 12.7 percent between 2005 and 2013.
“In upcoming years, the industry needs to lay a solid foundation to recruit and groom new talent in order to dampen post-2020 headcount declines,” Cerulli said.
The report attributed some of last year’s increased headcount to advisors joining existing teams rather than establishing new practices.
Advisors were more heavily focused on teaming to bring rookie advisors into multi-advisor practices, and were eager to hire junior advisors to help build their practices’ top lines, it said.
Some were also hiring service advisors, whose roles are more like relationship managers, to build advisory capacity for senior advisors.
According to the report, some 28 percent of rookie advisors are female, compared with 14 percent in the advisory industry as a whole.
Twenty percent of senior advisors considered rookies’ limited investment or financial planning expertise to be a major challenge when grooming them for succession, and 64 percent also said the length of time required to learn the business was a challenge.
Cerulli said data in the new report was compiled from proprietary surveys of more than 6,000 financial advisors affiliated with wirehouses, independent BDs, regional BDs, RIAs, dually registered practices, bank BDs and insurance BDs.
Advisors face challenges from aging client bases, with 57 percent having clients above the age of 60.