The decline in the ranks of financial advisers shows no signs of abating, as too few recruits are joining the industry.
The number of financial advisers in the United States fell by 1.3% — or approximately 4,000, in 2011, and will decline by another 18,600 over the next five years, according to global research firm Cerulli Associates Inc.
“The continual aging of the industry is not being offset by the influx of new talent,” said Tyler Cloherty, associate director at Cerulli. “The wirehouses are starting to train people again, but it's just not enough to make up for the number of advisers retiring and leaving the industry.”
Part of the problem is that independent broker-dealers and registered investment advisers don't have the means or model for training new people. They depend on the wirehouses and insurance companies to do it, and currently there are not enough new people to go around.
“Ultimately, the indies and RIAs have to find a new way to bring people in,” Mr. Cloherty said. “They have to go from a centralized training model to a decentralized one to stave off attrition.”
Mr. Cloherty projects that total head count in the industry will fall to 297,515 by the end of 2016, from 316,109 at the end of 2011. Independent broker-dealers and the wirehouses will see the biggest declines. The four wirehouses — Bank of America Merrill Lynch, Morgan Stanley, UBS Wealth Management Americas and Wells Fargo Advisors had 51,450 advisers at the end of 2011, and are projected have 45,580 by the end of 2016 — a 2.4% annual decline as advisers continue to retire or migrate to other distribution channels.
The independent broker-dealers will suffer an even more dramatic decline, according to Cerulli projections. Mr. Cloherty expects that in aggregate, they will lose 18,000 advisers by the end of 2016, an annual attrition rate of 5%.
The RIA and dually registered adviser channels stand out in the industry. RIA numbers are expected to grow by 4.7% annually over the next five years to more than 36,000, and dually registered advisers will increase 5.3% to nearly 24,000 by the end of 2016. Once seen as a way station on the path to becoming an RIA, dual registration has become a more popular option for advisers.
“People thought the dual registration model was a stopover to the RIA world, but it may be seen as a choice for the long term,” Mr. Cloherty said. “It allows them to piggyback on broker-dealer services and lets them keep the option of doing fee-based or commission business.”