March 4, 2024


Financial advisors with trillions of dollars in assets under management will soon be preparing themselves for retirement, making new talent a vital commodity in wealth management.

But people who are entering the industry these days don’t feel like it’s a welcoming place.

A A new report from industry research firm Cerulli Associates It is estimated that by 2022, more than 72% of early-career “novice” consultants (defined as those with three years or less in service) fail and leave the profession. While adding 18,207 new students last year, the industry lost 13,169 students, Cerulli said in the report. monday press release.

Cerulli found that the firm added only 2,579 new consultants last year, considering another 2,459 consultants retired, a figure it said was “barely offsetting” consultant departures.In other words, the emergence of wealth management as an industry Towards the Great Inheritance Cliff —unless it changes direction quickly.

“The industry is going through this crisis, and the replacement rate for advisors is going to drop,” Cerulli research analyst Stephen Caruso said in an interview. “Advisors are retiring significantly and because of succession crisis, the industry needs to bring in more consultants across the board. ”

Stephen Caruso1.jpg
Stephen Caruso is a research analyst with the wealth management team at Cerulli Associates.

Cerulean Associates

Advisers planning to retire in five years or less control about $2.4 trillion (8% of industry assets) by 2021, Cerulli said. As of 2021, nearly 37 percent of advisors plan to retire within the next decade, but more than a quarter of them (26.3 percent) are unsure of their succession plans.

“Where the rubber meets the road”
By investing early in a strong talent pipeline, recruiting more broadly and dedicating additional resources to developing entry-level talent, financial advisors can set themselves up for long-term success and one day transition smoothly into retirement. But industry recruiter Jason Diamond (Jason Diamond) said that this is difficult for many people to accept, because they are more focused on immediate profits.

“We get calls every day from consultants and companies telling us they need additional resources — they need consultants to free up capacity,” said Diamond, vice president and senior consultant at Diamond Consulting in Morristown, New Jersey. .

“But unfortunately, when the rubber meets the road, we’re talking about the type of people who are earning negative income, at least for a while … and a lot of companies or consultants aren’t willing to accept that.”

Diamond said he has seen consultants typically take at least three years to make enough connections And a profitable asset base for the employer – five to seven years in many cases. Diamond estimates that there is often a tipping point when consultants hit around $200,000 in revenue — remember that employers may keep around 40% of that — but that means more than $30 million to $50 million in assets under management.

“It’s a lot of money. It’s hard to do. It takes time. Especially for young people who don’t have the wide networks of rich people to draw on,” he said.

read more: Always stay online.That’s it

In the Cerulli report, 69% of budding advisors said they needed to build their entire client base from scratch, leaving many in a “catch-22” situation where they needed wealth and connections to get started, but It takes a lack of help to be successful. off the ground. While 45% of novices indicated that they managed small accounts for senior advisors, which could be their path to transition to larger accounts, some of them clearly did not receive clear information on how to make the transition.

“A well-structured training program should gradually bring rookie consultants into the production environment and allow their roles and responsibilities to develop naturally,” Cerulli said in the report.

However, Cerulli found that these so-called “novices” were in most cases already skilled professionals with valuable experience to draw upon.

“Only 15 percent of new hires are financial advisors as their first career,” the report said, adding that only 43 percent had previously worked in the financial services industry. The average age of rookies is 37, and many already have sales, marketing or investment experience. Cerulli found that while the financial advisor role has historically been sales-focused, the majority of newcomers (84%) are attracted to the profession because they want to “help others achieve their financial goals.”

Sustaining the Financial Planning Profession
Consistent with this, the training rookies most want is financial planning, not sales.

“71% of novice advisors consider financial planning training to be very important, yet only 47% find themselves very satisfied with their firm’s support on this topic,” Cerulli said in the report. “this Financial Planning Training This is by far the largest gap and a key area where companies should invest in improving their new advisor development programs. ”

Shawn Tydlaska, a financial planner in Burlingame, Calif., and founder and CEO of Registered Investment Advisors Ballast Point Financial PlanningHe said he believed the industry had a “moral obligation” to help advance the next generation of financial planners.

“As planners, we want to help people deal with personal financial stress. So, the more people we get into this industry, the better,” he said.

read more: New fraternity of aspiring planners seeks to build paths into the field

In his own practice, Tydlaska says, he trains advisors for two years in an apprenticeship-in-residence model, with the goal of helping them earn a certified financial planner license by the end of the two years and be able to work independently with clients .

“They’ve been in client meetings from day one. They’re taking notes, they’re learning,” he said.

Tydlaska – Co-Founder BLX Internship Program That Helping Fee Practice Build Career Pathways for Young Black and Latino Consultants— said there is also a business case for helping diverse advisors, who often come from less wealthy communities, May have fewer connections to start work.

“The future is diverse,” Tedraska said, noting that US wealth profile expected to diversify “By 2045, the Population Will Be a Minority”.

“So these planners will serve your customers,” he said.