The typical American financial adviser is 50.4 years old, works with 250 to 500 clients and manages $25 million to $100 million in assets.
Those are among the findings in the "Cerulli Quantitative Update Advisor Metrics 2007" report by Cerulli Associates Inc., a Boston-based research and consulting firm.
The comprehensive study of the industry found that there are 245,831 financial advisers in the United States, down 4.2% from 256,569 advisers in 2005.
The smaller adviser universe is a consequence primarily of a wave of mergers and acquisitions that has resulted in fewer regional and insurer-owned brokerages.
"The dually registered and registered investment adviser channels are growing and the other channels are shrinking, and there is a natural attrition," said Katharine Wolf, an analyst at Cerulli.
At the end of 2007, 88,802 advisers, or 36%, were in the independent broker-dealer channel, 5% fewer than there were in 2005, the year Cerulli conducted its first study.
Leading the decline was the insurance broker-dealer force, which saw its size shrink nearly 19% to 34,800 in 2007, compared to 42,745 in 2005.
"You are going to see the trend of shrinking channels continuing industrywide and you will not see a turnaround, but you may see stabilization at the current level of advisers or you will see a slight contraction," said Ms. Wolf. "It remains to be seen if the dually registered adviser is a transition point and will lead advisers to drop being dually registered or will they maintain multiple roles indefinitely."
The burgeoning field of advisers who are dually registered as brokers has increased 31% to 23,099, from 17,649 in 2005.
Meanwhile, the number of RIAs has grown to 13,622, 5.5% of the industry, from 10,801, or a 4.2% share, in 2005 as more advisers left the commission-based model to work under a fee-only structure.
"We think that dual registration is going to grow and not shrink and it seems that the sensible thing for brokers to do is to wear the broker and the RIA hats," said Tom Orecchio, chairman of the National Association of Personal Financial Advisors, based in Arlington Heights, Ill. "[Dually registered advisers] plan as registered investment advisers and sell products [as broker-dealers]."
"We think that the number of dually registered advisers is going to continue to grow because it is one of the ways that they are addressing the fallout of the broker-dealer exemption rule," he said.
Mr. Orecchio is also a principal of Greenbaum and Orecchio Inc., an advisory firm in Old Tappan, N.J.
THE NEED FOR YOUNG PLANNERS
As the number of advisers remains stagnant or shrinks, advisers are receiving little help from the younger crowd.
The report found that only 3% of advisers are 35 years old or younger, and not enough is being done to increase their ranks, said Ms. Wolf.
"It is going to be up to the firms and the advisers to solve the problem and no one has come up with a great solution yet."
College undergraduates will need to have the option of working in the adviser profession presented to them, and they will need experience, she said.
Peter Vessenes, president of Vestment Advisors Inc., a management training and consulting company in Shorewood, Minn., said its new advisers will be split between people in their 30s and 40s who are seeking out a second career, and advisers coming out of school.
He noted that advisers over the age of 55 are often burned out when they come up with a succession plan — and then decide to retire within two years.
The other challenge is that advisers have to realize that they don't need to give up their income to groom a successor, he said.
"It's often hard for older people to
trust younger people, and there needs to be a three- to five-year cycle to train the next generation of advisers," Mr. Vessenes said. "And for many advisers, success will come for those in a second career."
Aaron Siegel can be reached at [email protected].
