Change is a’comin—we’ve heard it for years. The average age of financial advisors in the United States at the end of 2017 was 52, according to Cerulli Associates, and or many advisors, it means that retirement is in the not-so-distant future.
The research and consulting firm notes that over the next 10 years, roughly 37% of advisors are expected to retire, which would put almost 39% of industry assets in motion. Partly as a result, Cerulli projects that total advisor headcount will decrease by 1.4% between year-end 2018 and 2023.
In “U.S. Broker/Dealer Marketplace 2019,” it finds that the wirehouse (40.7%), independent broker/dealer (IBD) (40.7%), national and regional broker/dealer (B/D) (39.7%) channels have the largest portion of advisors who are planning to retire and transition their businesses within the next 10 years.
Meanwhile, the hybrid registered investment advisor (RIA) channels (31.1%) and bank B/Ds (24.7%) have lower rates of advisors retiring within the next 10 years.
Similar to the attention being paid to the pending wealth transfer that is set to see $68 trillion in assets change hands between generations over the next 25 years), the industry is attempting to adapt to a changing of the guard amongst its own advisors.
Distribution channels
Across all channels, 28% of advisors who plan to retire in the next decade expect an advisor in their practice to succeed them, while 22% have no plan.
“While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses, Michael Rose, associate director of wealth management at Cerulli, said in a statement. “In an effort to overcome this challenge, firms are boosting recruiting efforts to bring new advisors into the industry and revamping training efforts to improve success rates.
“Just as importantly, B/Ds are working to create attractive succession options for advisors approaching retirement,” Rose added. “It will be increasingly important that firms operate successful training programs in order to attract and train qualified advisors, integrate these younger advisors within teams for whom they can serve as a pipeline of potential successor candidates, and operate effective business succession programs for retiring advisors.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
