The wealth management industry has an ongoing issue attracting and retaining next-gen financial advisors.
According to Cerulli, after years of targeted recruiting efforts, the average age of advisors remains in the mid-50s, with less than 10% of advisors under the age of 35. What’s more, 40% of advisors are projected to retire over the next decade.
If we can’t turn these demographics around quickly, this is a real problem for the investing public who will have less options for trusted financial advice. Firms’ growth prospects could also be in jeopardy.
What the wirehouse firms, regionals and large broker-dealers have been doing to recruit younger advisors and help them succeed in the business, hasn’t moved the needle enough.
The solution may lie with smaller independent offices making the effort to hire and nurture next-gen advisors one at a time by focusing on two related themes: feeling valued and compensation.
Compensation is a critical aspect of attracting and retaining next-gen talent. Plenty of young people join the industry, only to wash out because they can’t make a living in the early years. This can lead to frustration and burnout, causing promising young advisors to leave the business.
To get the right people in the door and keep them engaged while they get their sea legs under them, you need to establish a generous, thoughtful compensation package.
Consider putting your advisors on salary, so no one is worried about making a living. Unfortunate things can happen in this business when people are struggling financially. Working on commission, especially in the early years, often means long hours for little reward.
Consider Bonus Pools, Equity
Think about allocating a portion of your firm’s profits to a quarterly bonus pool. All employees, from admins to advisors, should be eligible. Bonuses can be determined by tenure, performance and accomplishments. This ensures that everyone is working toward the same goal since they all have skin in the game.
Next-gen employees expect benefits, so provide everyone with a full package, including medical, dental, vision, life and disability insurance, a 401(k) with a match and maybe even an employee profit sharing plan.