The ability of financial advisory firms to acquire and retain talent is becoming more difficult as many advisers are going independent and retiring.
That's according to a financial adviser satisfaction study by J.D. Power released Thursday.
“No doubt, the wealth management industry is in the eye of the storm right now, and the implications are far-reaching for firms that have been rooted in the traditional financial advisory services business model,” said Mike Foy, director of the wealth management practice at J.D. Power. “As robo-advisers become popular, the technical skills like managing a portfolio becomes less important. What's more important are people skills. Advisers will have to be client managers, keep people calm during volatility.”
A firm, for instance, with 10,000 financial advisers may have around half a billion in annual revenue that could be at risk during the next few years due to the independent/retirement trend, according to the study.
The number of advisers considering going independent doubled to 12% in 2016, from just 6% two years ago, according to the study. Another 12% of advisers said they are likely to join or start a registered investment adviser in the next few years.
Especially among dissatisfied employee advisers, the study showed that 46% say they “definitely will” or “probably will” leave their firm in the next one to two years. In addition, 31% of advisers are readying to retire in the next 10 years.
To face these changes, advisory firms will not only have to attract and retain quality advisers but also create or refine hybrid business models that incorporate more technology like robo-advisers and self-service options into their offerings, said Mr. Foy.