Wealth management industry is facing a looming retirement crisis, report warns

Wealth management industry is facing a looming retirement crisis, report warns
Despite technology adding capacity, an advisor shortage is predicted.
FEB 11, 2025

The US wealth management industry is facing a retirement crisis; not a financial shortfall but a talent shortage caused by retirement of thousands of advisors.

New research warns that recruiting new people into the industry is not happening fast enough to offset those retiring. And this is at a time when wealth management demand is increasing by a larger cohort of wealthy people, more complexity in their needs including greater reliance on personal savings amid fears of the long-term outlook for Social Security, and willingness to pay for financial advice delivered by humans.

McKinsey’s report highlights that the advisor workforce has only grown by 0.3% annually over the past decade and is projected to decline by 0.2%. By 2034, assuming current levels of advisor productivity are maintained, the report expects a shortage of around 100,000 advisors.

The firm estimates that the number of affluent households (with at least $500K in investable assets) will grow by 4-5% annually – far higher than the 0.6% annual rise in the general population. Its previous research revealed that wealthier households are willing to pay a premium for human-delivered financial advice rather than customized digital advice.

This all means that demand for wealth management services is set to grow and firms are expanding offerings to include a broader set of capabilities including tax, trust, estate, philanthropy, and more.

But while many productivity initiatives have been introduced, the report notes that most of the ‘quick wins’ in this regard have already been realized. That limits the ability of firms to serve more clients with their existing headcount.

ATTRACTING TALENT

Attracting talent has included recruiting advisors who want to switch from other firms, including those who choose to go independent, but long term new people will need to be brought into the industry even to replace those who leave through retirement or for other reasons.

Not only will firms need to have compelling strategies to entice talent that is also being courted by other professions, but growing headcount will also require faster growth for new talent and continued improvement of productivity for established advisors.

The report shows estimates based on three scenarios:

  • If current trends continue, the wealth management industry will add 290,000 advisors by 2034.
  • But it will need as many as 370,000 advisors, a net increase of up to 80,000 assuming productivity gains and better recruitment and retention.
  • If productivity and recruitment/retention does not improve, there will need to be as many as 400,000 advisors.

Among the measures suggested to address the estimated advisor shortage are structured programs and internships to increase entry-level talent, while also encouraging career switchers, and underrepresented groups. Also, boosting productivity using technology such as AI, along with team-based advisory models. Finally, succession planning to mitigate the impact of retiring advisors.

 

Related Topics:
How to restart Social Security benefits 

Latest News

Decades-old will leaves fate of late actor Gene Hackman's $80M fortune uncertain
Decades-old will leaves fate of late actor Gene Hackman's $80M fortune uncertain

The iconic actor's death alongside his wife, Betsy Arakawa, leaves pressing questions about what happens next to his assets.

Fallen tech stocks fail to entice wary investors
Fallen tech stocks fail to entice wary investors

Big tech firms like Alphabet and Amazon are trading at bargain valuations, but a risk-averse market has meant no one's biting.

Social Security Administration sets record straight on dead people getting beneifts
Social Security Administration sets record straight on dead people getting beneifts

Of millions of deaths reported yearly, just a fraction of a percent are "erroneously reported" cases that need to be corrected, the agency said.

Trillions wiped off equities but don't worry, it’s 'healthy' says Bessent
Trillions wiped off equities but don't worry, it’s 'healthy' says Bessent

US Treasury secretary says that markets will 'do great' over longer term.

How structured credit investments can help with diversification
How structured credit investments can help with diversification

Sam Reid from $26.7B AUM alts asset manager Canyon Partners shares insights.

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'

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies