Podcast Center
Video Center
Webcasts
Resource Center
Events
March 19, 2024 at 03:43 PM
What You Need to Know
- A significant portion of advisors are nearing retirement age.
- Equipping new advisors to discuss values-based investing aligns with younger generations' priorities.
- Outsourcing day-to-day management of assets opens bandwidth to deliver on higher-level services.
In the evolving landscape of financial advice, the looming wave of retiring advisors presents a critical challenge, with more than a third of the industry planning to retire in the next decade.
The reason for the impending shift is not mysterious: A significant portion of advisors are nearing retirement age. According to Cerulli, nearly 60% of RIA assets are managed by advisors aged 55 and older, and the current average age of financial advisors is 50.
The advisory industry stands at an inflection point where proactive planning is crucial not only for survival but also for thriving in the years ahead. To ensure a successful transition to the next generation of advisors and investors, advisors must focus on recruitment strategies, appealing to emerging investor demographics and scaling engagement models to address a shrinking advisor pool.
By planning for succession, advisors approaching retirement can secure their financial future, enhance their firm’s attractiveness to potential clients and leave a legacy by mentoring the next generation of financial advisors.
Here are three steps to help make that happen.
Recruiting Next-Gen Advisors
According to Cerulli, over 18,000 trainees entered the financial advisor industry in 2023. However, the number is still insufficient to offset attrition from training program failures and retirements.
Current advisors must do more to attract younger advisors to the profession and set them up for success, including eventual succession.
To build a stronger talent pipeline, firms should look beyond fresh B-school graduates. Expanding their search to nontraditional backgrounds can unlock valuable potential. For instance, I recently spoke with a firm that achieved success by recruiting several members transitioning from education careers. They already had great people and organizational skills and have been getting up to speed in this new career phase.
Attracting top talent is just the first step; retaining them requires ongoing investment. For example, many young advisors might be excited to join a practice but have trouble envisioning how they will get to the point where they manage their own large book of business. Practices must establish clearer communication about career paths so that the next generation of advisors is aware of what they need to do to progress. This could come in the form of a handbook, virtual or in-person seminars, and ongoing check-ins.
More experienced advisors may have a lot to learn and gain from junior advisors as well. Many may have an interest in technological innovation, tailored portfolio strategies and personalized client experiences. Moreover, junior advisors naturally appeal to a younger investor pool, which is crucial as we prepare for the largest wealth transfer in history.
