If you take a look at yourself and other advisors in your practice, you can probably see a lot of gray. On the whole, the financial services industry is aging; a recent Cerulli Associates report found that the “average age of financial advisors is 50.9 and 43% of advisors are over the age of 55.” Less than 5% of advisors are under 30.
This demographic trend will become increasingly problematic as advisors start retiring and struggle with succession issues. Firms need to adapt by bringing in younger advisors.
Independent advisory firms have long relied on wirehouses and large firms to do their recruiting, hiring, and training for them. They’ve been able to offload the costs of training new talent while cherry-picking the best producers when they get tired of the wirehouse model. Unfortunately, those days are pretty much at an end.
Industry attrition means that the industry has lost 32,000 advisors since 2005; another 25,000 will leave the industry by 2017. Wirehouses and independent advisory firms are all scrabbling for talent and the pickings are getting slimmer. Top producers are expensive to lure away and competition is high for seasoned advisors who have solid books and manageable egos.
Instead of fighting to lure in mid-career advisors, consider recruiting younger talent. While junior advisors may take longer to learn and become profitable, there are some important benefits to bringing in younger employees.
Here are a few reasons why you should be recruiting younger advisors:
Train Them Up In The Way They Should Go
There is no single career path for financial advisors and catching them young means you can guide their training and development to suit the needs of your firm and its clients. Some advisors task junior advisors with developing strategies to connect with the next generation of investors or give them technical roles in the firm.
Connect With NextGen Clients
Generation X and Y clients are the future lifeblood of your business and you should be thinking ahead about how to bring them in as clients. Younger advisors who are tech-savvy, understand how to communicate with younger investors, and enjoy interacting online can be a great resource for connecting with NextGen clients.
Several forward-looking advisory firms are using their junior employees to improve retention of accounts when they transition between generations and improve their communication strategies.
Think About Succession
Succession planning is a big buzzword in the industry right now – as it should be. Over the next decade, 12,000 to 16,000 advisors and brokers are going to retire each year and less than one-third of them have a succession plan in place.
The current recruitment rate of advisors is far below what it will take to replace the number who will retire, meaning firms probably won’t be able to buy the books of every retiring advisor. This leaves advisors with the option to either merge with another firm or transition their clients internally to groomed successors.
Advisory practices depend greatly on the personal relationships you’ve established; if you don’t have a plan for transitioning out of the business, you may be in for an ugly surprise when you retire. Hiring younger talent gives you the opportunity to evaluate several different succession models and consider an internal transition once you’re ready to scale back your involvement with the firm.
The Bottom Line
Think hard about how well prepared your firm is for the future. If you aren’t thinking ahead to succession and next generation planning issues, you should be. Bringing in younger advisors can be a great way to foster fresh ideas, connect with younger clients, and can give you more flexibility at retirement.