Amid news of sizable layoffs at some of the nation’s largest tech companies and cutbacks in investment banking, it’s heartening to learn that the financial advice business offers job stability in good times and bad. In fact, a recent analysis of Labor Department data by InvestmentNews research chief Devin McGinley finds that being a financial advisor is one of the most recession-proof jobs in the U.S., with the number of advisors employed rising steadily from 2004 through 2013, even as total employment fell sharply in the wake of the global financial crisis of 2008-09.
More recently, a decline in the ranks of advisors appears to be more a result of advisors retiring than firms cutting back, with virtually all wealth management firms lamenting that demand for advisors far outstrips supply. Given the historical record and the continued aging of the advisory workforce, it would seem that advisors have little to fear from a recession, whether or not one comes to pass later this year or in 2024.
Even market downturns, which in the past soured clients on investing and probably affected advisor head count to a degree greater than recessions, now don’t seem to be as powerful a negative. As a study InvestmentNews Research conducted last year found, only 17% of investors who work with an advisor said they would very likely fire them over a decline in their portfolio. Anecdotal evidence supports this, with few advisors saying they lost clients in the wake of last year’s significant declines in both the stock and bond markets, a double whammy that was unusual in itself.
Why are clients sticking with advisors and making financial advice such a stable profession?
All these results beg the question of what’s different now. Why are clients sticking with advisors and, in the process, making financial advice such a stable profession?
One reason is that do-it-yourselfers and those with a penchant for trading have never had it better. Whether they are careful, educated investors or gung-ho market players, those who feel no need for advice have instant, virtually free access to markets and up-to-the-minute tech tools at their disposal.
But most people aren’t day traders and many need help with decisions having financial ramifications that often can be complex. The steady transformation of the financial advice profession from one focused on investing almost exclusively to one that provides holistic financial planning in varying degrees is probably the main reason demand for advisors remains strong.
Even if an algorithm is doing the decision-making, most people struggling with a major life choice involving money would rather hear the answers and some rationale for a course of action from a live human being than from a bot. For that reason, as long as wealth management firms can continue to attract and retain knowledgeable and empathetic individuals — sometimes a challenge for firms where rainmaking is the overriding priority — financial advisors should always have a job.
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