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Young, Productive Advisors Are on the Move: Fidelity

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Financial advisors are on the move, or are thinking about it, Fidelity Clearing & Custody Solutions said Wednesday in releasing results of its third biannual study on advisor movement.

Fidelity noted that some 34,000 financial advisors moved to other firms in 2014.  It surveyed 692 advisors from a variety of channels with at least $10 million in assets under management.

The new research found that movers, defined as advisors who had switched firms in the past five years, tended to be younger than in the 2013 study, were more likely to be women and had clients with higher assets. Nearly a third of advisors moved for the first time within the first four years of their careers.

Among the movers, Gen Y advisors represented 43% of advisors with $250 million or more in assets under management, compared with only 14% in 2013. This means more business is at risk with these young and early movers, Fidelity said.

“We’ve been telling firm leaders that they need to go beyond viewing this trend as a threat,” Bob Oros, head of the RIA segment at Fidelity Clearing & Custody Solutions, said in a statement.

“Instead, let’s try to understand the motivations of these advisors, particularly the younger ones, so that this becomes an opportunity for firms to gain insights into how to attract new talent and retain their existing work force.”

Moving Toward Independence

Fifty percent of those who moved to a new firm chose a registered investment advisor or independent broker-dealer, and many of the movers came from banks and wirehouses. They said they wanted more control over daily operations, the ability to focus on clients and more leeway to develop and implement investment strategies.

Financial motivations remained a chief reason to move, but a less important one than in the past. Thirty percent of movers said they left a previous firm in order to achieve a better work-life balance, compared with 21% in the 2013 study, and 15% said they wanted more control over their practice, versus 8% in 2013.

How has this worked out for those who moved?

Ninety-two percent said they were happy they had done so, 80% said they were better off financially and 67% reported job satisfaction — a huge jump from the 8% who said they were happy before the move.

Movers in the study who had been with their firms for three to five years experienced, on average, a 59% increase in their assets under management, from an average of $105 million to an average of $167 million.

Of course, those who moved to a new firm faced some unexpected challenges, though the study showed these to be of less concern than in the past.

  • Amount of paperwork involved: 25% vs. 39% in 2013
  • Length of the transition: 24% vs. 29%
  • Technology issues: 20% vs. 28%
  • Difficulty in transferring investments: 16% vs. 21%

Fidelity suggested that these challenges may be less of an issue today because advisor movement has become more common in the industry.

For 40% of movers in the new study, former colleagues who had already moved were involved in their decision and possibly helped them set more realistic expectations, compared with 29% in 2013.

Implications for Firm Leaders

Fidelity said the results of the new study, as well as research from its Future Leaders Study, showed that firms were more successful when they formalized a support structure to develop and retain top talent.

How can they do this? For one thing, they can provide more autonomy around and improve investment capabilities. Movers want to be able to choose investing strategies that are most appropriate for their clients, and they want access to research and analysis on investments.

Firms should consider how to improve existing systems and potentially implement new ones.

In addition, firms can give more explicit information on compensation. They might provide younger advisors with training and communication on how compensation works at the firm, initially and throughout their careers, and create a clear career path with transparent guidelines on the results needed to transition from one role to another.

For more experienced advisors who are critical to the firm, they might offer equity and ownership opportunities.

Finally, firms can promote job satisfaction, particularly for top performers. Movers want more support from their employers.

Firms may consider offering them access to client referral programs and provide marketing and business development support to help them build their books of business and differentiate themselves in the marketplace.

— Check out How Advisors Can Profit From the Talent Shortage on ThinkAdvisor.


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