Since the bear market of 2000–2003, the financial advisory industry has seen a steady decline in the hiring of young advisors. According to the Certified Financial Planner Board of Standards, today, there are more CFPs over age 70 than under age 30.
At the same time, baby boomers have begun passing their wealth onto their children who are part of the so-called millennial generation. CNBC reports that over the next several decades, Americans will transfer about $30 trillion in assets to the next generation.
With so many veteran financial advisors set to retire in the next 10 years, and the ongoing wealth transfer to millennials, the wealth management industry is facing an identity crisis — and aging CFPs and FAs are finding themselves at a career crossroads.
What’s An Aging Advisor to Do?
As veteran FAs prepare to leave the profession, they may wonder what’s next for them. After helping retiring clients for their whole career — through bull and bear markets, high and low inflation, tough times and good times — many of these advisors may not know how to help themselves in the midst of a changed industry.
As retirement approaches, some FAs may not have an adequate succession plan in place for transitioning client relationships, particularly for managing a millennial clientele who expect quick, easy and online solutions. If older CFPs have not modernized their business or kept pace with technology and trends, they may not have the resources needed to handle the financial planning and comprehensive wealth management that younger clients expect.
Similarly, many older FAs are finding that their business model is outdated. They may not have shifted their practice from transaction to recurring revenue as quickly as they should have, which makes their advisory practice less marketable for a possible sale.
On the personal side, many other questions remain. Did they save enough for retirement? Many don’t have a pension plan, some have deferred compensation, but few have saved enough for a lifestyle in retirement on par with their working years.
Where Do Wirehouses Fit In?
For retirement-age FAs working at large wirehouses, such as UBS, Merrill Lynch and Morgan Stanley, the future is even more uncertain. Several wirehouses recently announced plans to reduce their upfront payout and back-end recruiting packages. They also require a 7-, 8- or 9-year employment contract. At 65 or 70 years old, who wants to sign up for that?
As FA compensation plans have evolved over the years at the major wirehouses, it seems that advisors’ net commission has been squeezed. Advisors are no longer paid on smaller accounts or certain other products, and often feel pressured to move away from a transaction-based business to a recurring revenue model. They share an assistant and receive fewer benefits. All this can make even the most seasoned FAs feel like they are being forced out the business or feel like they must continue working well past retirement age, sacrificing their own retirement dreams after working so hard to make their clients’ dreams come true.