This news service often hears the complaint that the average age of advisors is rising while, at the same time, they need to deal with inter-generational wealth transfer and the requirements of a rising cohort of younger HNW individuals. A new report underscores these concerns.

The number of new advisors entering the industry is “barely offsetting” retirements and trainee failures as firms struggle with high wash-out rates, according to a report by Cerulli Associates, the analytics and research firm. Its findings chime with concerns this publication has heard about a continued talent shortage facing wealth managers in several global regions.

The report was based on the US market.

Financial advisor headcount grew by just 2,579 advisors in 2022, after a rookie advisor failure rate of more than 72 per cent. In response to high attrition, financial services firms must work on developing sustainable talent pipelines that capture a wider range of talent, the organization said.   

New advisor recruiting is largely by word-of-mouth referrals – nearly two-thirds (64 per cent) of rookie advisors were recruited this way. This informal recruiting process makes it more difficult for firms to reach a broad cross-section of applicants, Cerulli said. 

“Rookie advisors come from all different backgrounds,” Stephen Caruso, research analyst, said. “Just 15 per cent of rookies report financial advisor as their first career and only 43 per cent of rookie advisors have previously worked in financial services. Broker/dealers and RIAs must find new avenues for connecting with potential candidates and spreading awareness about the profession,” Caruso said. 

This news service has tracked the challenges of talent management in several articles. An oft-repeated comment is that the average age of advisors is rising, while the industry must cope with a multi-trillion dollar intergenerational wealth transfer process. 

Within firms, structured training programs will be key to advisor success. Almost half (45 per cent) of rookie advisors report that their responsibilities include managing small-balance accounts for a senior advisor, which can be a great learning opportunity for rookies who need client-facing experience. However, keeping rookies in a support role for too long can limit their growth and make it difficult for them to develop their own clients, given that 69 per cent are responsible for building their own client base from scratch. 

“A well-structured training program should gradually shift rookie advisors into production and provide a natural progression of their roles and responsibilities, so that practices can capitalize on a new resource without boxing a rookie into an operational or support role,” Caruso said. “RIA custodians and B/D home offices should actively support this transition process by providing best practices and a framework advisors can use to train future successors.”