Advisors Are Getting Younger: FA Insight

The FA Insight study suggests that this talent gap may now be making its presence felt. The study finds that more than two-thirds of firms reported that hiring for revenue-generating roles — lead advisors, associate advisors and business developers — is becoming increasingly challenging.

“It’s just getting harder and harder to recruit from their traditional sources for revenue-generating roles,” Oligino said. “So traditionally what an advisor would do is go out and lure someone from a competitor. Somebody with an established book of business with decades of experience, someone who can hit the ground running right away generating revenue. And it’s just getting harder and harder because people are starting to retire, or they’re not interested in moving because they are three to five years out from retirement.”

As a result of this impending talent shortage, Oligino believes that the recent college graduate pool will continue to grow and become a primary source for advisor recruits.

Another result of the talent scarcity is that more firms are outsourcing, according to the study. Six out of 10 firms have realized labor savings as a result of some form of outsourcing, the study finds. In addition to outsourcing compliance and back-office functions, many firms are using third parties to offer additional services, such as tax preparation and insurance, even if they advertise these services as client offerings.

“Advisors are starting to look at, can they partner with third parties to offer those additional services but not carry that overhead expense within the firm?” Oligino said.

One thing that hasn’t changed much in two years: an absence of formal succession plans, according to the study.

As the ranks of advisers nearing retirement swell, the need for succession plans only grows more critical.

The share of firms with an owner three years or less away from retirement increased from 7% in 2015 to 12% in 2017. According to the latest study, only 37% of advisory firms said they had a viable plan. The rest either don’t have a plan or have plans with serious flaws, such as the lack of deal-financing details or no named successor.

“The numbers show there are still significant amount of advisors without a viable succession plan, but they are starting to think about what’s next and when might they retire or what are their next plans,” Oligino said. “You need to bring in younger talent and start to groom them over the long term so that when you are ready to go they’re ready to take over.”

—Related on ThinkAdvisor:

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• Looming Advisor Shortage Demands Better Gender Balance
• Should You Outsource Your Investment Management?