Everyone wants NextGen advisors. Why can’t they find any? 

Everyone wants NextGen advisors. Why can’t they find any? 
One of the main drivers creating the need for firms to implement a succession plan is the staggering wealth transfer that's on the horizon.
JAN 31, 2024
By  Alex Goss

The average age of a financial advisor is 57 and climbing, according to a J.D. Power survey. There are more advisors over the age of 70 than under the age of 30, according to the Certified Financial Planner Board of Standards Inc. That imbalance can present numerous growth and succession challenges for the wealth management industry. 

For firms pursuing M&A as a growth strategy, diversity in age should not only be a consideration to provide historical knowledge and wealth management experience but also a method of ensuring a foundation for succession planning. Advisors early in their careers are an ideal group to buy books of business, but this demographic is getting harder to find. 

Meanwhile, the need for financial advice continues to grow as more individuals have access to retirement savings plans or investment platforms. The Department of Labor estimates the need for financial advisors will outpace other professions in the coming decade. 

SUCCESSION AND GROWTH 

Not only does an influx of younger advisors take pressure off a firm’s owners, allowing them to transition more seamlessly than those at firms forced to pursue consolidation, but this diversity in age can help ensure that the firm is able to capture future growth. With the DOL projecting an increased need for financial advice over the coming decade, it’s crucial that a firm is positioned to respond to this demand. 

What younger advisors can bring to the table is an eagerness to quickly achieve the level of success their older peers have already achieved. They bring a hunger, a passion, to expand their book, or purchase one.  

Just as importantly, their longer time horizon can drive organic growth for your firm.  

GROWING DEMAND, UNMATCHED SUPPLY 

Of course, one of the main drivers creating the need for firms to implement a succession plan is the staggering wealth transfer that's on the horizon. Baby boomers are expected to transfer an estimated $68 trillion in wealth to younger generations over the next decade, creating the tremendous need for financial advisors to support this new generation of clients.  

There’s a growing number of professionals nearing retirement across all industries, including wealth management. However, as a wave of baby boomers begin retiring, many wealth management firms have a NextGen pipeline that can’t keep up.  

In fact, Cerulli Associates estimates that about 36 percent of current financial advisors will retire in the next decade. Meanwhile, it also estimates that close to 75 percent of advisors with less than three years of experience left the industry in 2022.  

That’s a gap that doesn’t bode well for firms or for the clients who will be seeking financial advice as they inherit wealth over the next decade. Or clients who recently inherited wealth and want an advisor with a long career path. 

DEVELOPING A PIPELINE 

There’s an urgent need to begin closing this gap for RIA firms that seek further growth. That begins with finding NextGen advisors who are poised for growth organically or through succession. 

Of course, this is easier said than done, as Cerulli’s report makes clear. So how can firms attract and retain younger advisors and stem the tide of these up-and-coming professionals prematurely leaving the industry?  

Some firms choose the unsustainable path of overpaying targeted advisors while others build equity programs, flexible engagement structures or long-term payouts to attract this key demographic. It seems clear that firms with flexible ownership structures and capital programs will have an upper hand when bringing NextGen advisors aboard by giving them a chance to grow and the incentive to do so within that firm’s network.  

The wealth management industry is facing pressure from both ends of the advisor spectrum – a larger number of advisors retiring with not enough joining the profession to offset the influx of services that will be needed during the “Great Wealth Transfer.” 

Alex Goss is co-CEO and co-founder of NewEdge Advisors, a New Orleans-based RIA. 

Will M&A in the RIA industry stay hot in 2024?

Latest News

Senate Majority Leader pushes full repeal of estate tax
Senate Majority Leader pushes full repeal of estate tax

The Republican leader's call to end the death tax, part of a long and growing wish list of cuts and reductions, would offer relief to a small but important sliver of America's wealthiest taxpayers.

Wall Street bonuses surged 32% to $47.5B last year, NY comptroller says
Wall Street bonuses surged 32% to $47.5B last year, NY comptroller says

The 2024 bump in bonuses made for the largest total pool in records going back to 1987, but economic uncertainty and federal changes weigh on this year's outlook.

Advisors seek transparency on DIY investing as Robinhood faces investigation
Advisors seek transparency on DIY investing as Robinhood faces investigation

'I feel like they have created an addictive gaming culture, which is not healthy for investing.'

Dynasty forges RIA custody partnership with Goldman Sachs
Dynasty forges RIA custody partnership with Goldman Sachs

The collaboration gives Dynasty's $105 billion network of over 500 advisors access to new custodial services, asset management, and lending expertise.

Investors turn cold on hottest emerging-market ETF as China back in favor
Investors turn cold on hottest emerging-market ETF as China back in favor

Record redemptions from the ex-China strategy came as money managers consider Beijing's latest stimulus push and Chinese AI optimism.

SPONSORED Focus on clients, not compliance – why Gary Corderman found his fit with Farther

This wealth management platform finally delivers on the technology promises other firms couldn't - giving advisors a better way to scale and serve

SPONSORED Beyond the all-in-one: Why specialization is key in wealth tech

In an industry of broad solutions, firms like intelliflo prove 'you just need tools that play well together'