The average age of financial advisors is on the rise, which means it’s critical that the industry recruit and develop a capable next generation of financial professionals. Unfortunately, recent studies indicate that the financial services industry is failing in the recruitment of young talent. That talent gap could have serious consequences for clients and also for advisors who are looking to exit the business in the next few years.
According to a 2011 study by Cerulli Associates, the average age for financial advisors was 49.6, which was a year older than the average age in 2010. The average age was 50.6 for advisors in wirehouses. The same study also revealed that 22 percent of all advisors are under the age of 40 and only five percent were under the age of 30. From 2004 to 2010, the industry shrunk by 4.3 percent, from 334,919 advisors to 320,378.
A potential talent “crisis”
The lack of young talent has some industry leaders concerned. A Raymond James executive called the situation alarming and possibly a crisis. He predicted that advisors will retire out of the industry in droves with no next generation in line to take their places. More recent data seems to back up that idea. Pershing projects that 25 percent of advisors will retire in the next 10 years, which means that the industry will need to recruit more than 230,000 new advisors.
The cause of the lack of talent can be traced to a few issues. One is the hiring practices that the industry – wirehouses in particular – have employed over the past 10 to 15 years. Firms have often looked for established professionals who have a large network of connections and a certain level of business acumen. For example, RBC has reported that the average age of their newly hired advisors is 38.
College graduates also don’t seem to have significant interest in joining the industry. Many view financial advisor positions as sales jobs despite the industry’s shift towards holistic planning. In a 2013 Pershing study, 96 percent of surveyed college students said they had heard of financial advisors. However, only seven percent had any interest in becoming one.
Succession Link and Advisors Ahead recruiting next generation and providing more options for exiting advisors
At Succession Link, we have recognized that older advisors have listed on our site for more than just selling their business. They also list for succession and continuity. We’ve recognized that the lack of a next generation of advisors could be very troubling for current advisors wishing to retire in the next 10 years. There may not be a significant number of buyers for financial services practices in the coming years.
To help address the issue, we’ve joined forces with Advisors Ahead. Our new strategic alliance will help identify college students who are interested in becoming financial advisors. Advisors Ahead’s program offers preparatory curriculum and internships that provide on-the-job experience. When a student is ready to begin his or her career, Advisors Ahead can help place that student in an entry-level residency program. More than 3,000 students have already applied for the program.
The program has two goals. The first is to help established advisors develop a succession plan by matching them up with suitable college students. The second is to help new advisors find success. The traditional runway for advisors has been so short that many fail out of the business quickly. By providing new advisors with an internship, residency, and partnership with an established advisor, we hope to give the next generation better odds for success while simultaneously helping older advisors within Succession Link community more options to exit the business.