Where are wirehouse advisors and the overall industry headed? The latest research paints a conflicting picture.
The number of advisors in the U.S. grew by 1.1% in 2014, the first time since 2005 the headcount had increased, according to Cerulli Associates. In a recent report, Cerulli says 308,937 advisors did business in 2014 across the wirehouse, broker-dealer and RIA channels — up slightly from 305,610 in 2013.
Cerulli predicts that the upward momentum should continue over the next three years. “Many positive developments led to the headcount growth last year,” explained Kenton Shirk, associate director at Cerulli, in a statement. “From the advisor perspective, there is a heavier focus on teaming and onboarding rookie advisors into multi-advisor practices. Advisors are eager to hire junior advisors so they can refocus their own efforts on their largest and most ideal clients. There is also greater awareness and concern about succession preparedness.”
The research group cautions, however, that the looming succession cliff may reverse positive growth by 2020. With a big rise in advisor retirements, the headcount should start to fall again at an even faster rate than in recent years, it explains. “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 research group’s latest report, “Advisor Metrics 2015: Anticipating the Advisor Landscape in 2020,” attributes some of the rise in 2014 to advisors joining existing teams rather than establishing new practices. (According to the report the number of advisors decreased by 12.7% between 2005 and 2013.)
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 says. 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% of rookie advisors are female, compared with 14% 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% also said the length of time required to learn the business was a challenge.