The advice industry is still struggling to attract new talent while facing a potentially huge number of retirements by aging advisers.
By 2017, the industry will shed more than 25,000 advisers, down from just over 280,000, due largely to retirements, according to a new report Monday from Cerulli Associates Inc.
After peaking in 2005, the overall industry head count has fallen by more than 32,000 advisers, according to Cerulli. The firm is predicting that the losses will come mostly from the wirehouse, independent broker-dealer, bank and regional channels.
The latest predictions point to a continued trend toward fewer advisers, a worrisome development as the ranks of retired baby boomers swell.
“A good number of advisers are coming up on retirement,” said Sean Daly, a Cerulli analyst. About 10% of advisers were over age 65 as of yearend, so “the potential is there for rapid retirements.”
Whether a significant number of advisers continue to work past normal retirement age remains to be seen, he said.
Regardless, financial firms must work on ways to bring in a new generation of advisers, Mr. Daly said.
He noted that some firms have been improving and lengthening training programs, offering scholarships to CFP candidates, and giving incentives for teams to bring on junior partners.
The traditional recruitment channel is to go to a wirehouse, but new advisers get burned out in that channel, said David Grant, founder of Finance for Teachers, Inc.
“Even if they know about the independent channel, [young advisers] say it's hard to get hired,” he said.
Spots at promising independent firms are few, and competition is robust, said Mr. Grant, who has led a National Association of Personal Financial Advisors' networking program for young advisers.
At the same time, advisory firms have complained about not being able to find good entry-level candidates.
Some independent firms prefer people with some business experience who may relate better to wealthier clients than a fresh-scrubbed graduate, Mr. Daly said. And they may have a limited pool of candidates in their geographic area.
Some college students are turned off by financial planning because the perception is that “they have to go out and sell stuff,” said Michael Kitces is a partner and the director of research for Pinnacle Advisory Group Inc.
And other financial careers have better defined career paths, Mr. Kitces added.
Meanwhile, financial firms will have to figure out how to manage more assets per adviser, Mr. Daly added.
In fact, that's already happening. The average adviser last year managed about $35 million, but today that's closer to $41 million, Mr. Daly said.
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