There’s a statistic looming over the financial advisory industry. It’s something we have known for years, but we still haven’t quite cracked the code on how we could solve it. So, what is it? That the average age of financial advisors is approximately 55-years-old. Even when we dive into that number, it’s not simply a handful of older advisors skewing the data. In fact, only 11% of financial advisors are under the age of 40.1
We are reaching a tipping point – the industry needs to come together to attract new talent to the financial planning profession. If we don’t act now, the industry will experience an extreme talent shortage as the majority of advisors retire over the next 10 – 15 years.
The Problem
There is no shortage of clients, but there is a shortage of advisors. As investors continue to grow their wealth nationwide, it’s hard to imagine who will offer these investors advice in the not-so-distant future. Without new advisors entering the workforce, these Gen X, Millennial and Gen Z investors could be forced to only work with automated robo-advisor solutions. While these solutions can be helpful for those with relatively simple financial situations, they fall short in dealing with complex portfolios and mapping to long-term financial goals. These pieces of technology don’t fully appreciate investors’ needs or provide the support they need day-in and day-out.
The only way to address this trend and help secure strong financial futures for young investors is to add young advisors to the industry. While this mass wave of advisor retirement is starting now, we still have time – time for young advisors to grow. Time for them to learn from current advisors who have spent their careers helping investors achieve their goals and retire comfortably. Spending the coming years learning about the ins and outs of the industry and how to deliver valuable financial advice will put these next generation advisors on the right track to run the advisory industry of the future.
The Impending Wealth Transfer
You may be thinking – older generations still hold the vast majority of wealth in this country. Will younger generations even need financial advice any time soon? The short answer: absolutely.
We are entering a period known as the “Great Wealth Transfer” – 45 million U.S. households will transfer more than $68 trillion in assets over the next 25 years, according to a study from Cerulli Associates.2 This shift will bring more wealth to younger clients who will need help managing those assets and investing for their long-term financial goals. Beyond simply needing financial advice, clients want to work with financial advisors who understand their stage of life, their experiences, what they are trying to accomplish. Oftentimes, the advisors who understand these factors the best are those of a similar age, gender, and background. Clients often opt to work with advisors who look like them and can relate to their specific challenges and opportunities.
Young advisors entering the industry can find these clients in a similar stage of life – this connection is a great way to establish strong relationships early on and develop a portfolio of clients. Advisor-client relationships are incredibly sticky. Once an advisor starts working with a client, if they make the right financial steps and work to maintain a strong relationship it’s likely that the client will stay with that advisor for the long-term. Even if young advisors start building their client list with clients who have relatively low asset levels, those assets will grow over time as their earning potential rises and the Great Wealth Transfer plays out.
The Opportunity for Next Gen Advisors
More than being a need for the industry, becoming a financial advisor is a great move for young professionals looking to establish their careers. The job market is competitive, but the advisory industry is full of opportunities. For one, wealth management firms across the country are making a huge push to recruit for top talent. These firms offer tons of opportunities to grow and learn from financial advisor industry veterans.
These experienced advisors are looking for the talented young individuals who will drive the future of their firms and ensure their clients are served well into the future. These advisors aren’t just looking to train– they have their sights set on their succession plans that will move them toward their retirement. Interestingly, only a small percentage of financial advisors have developed succession plans for their businesses. Many haven’t found the right advisor to carry the torch once they retire. This means they shockingly have no plans of what to do with their clients when it’s time for them to step down. Finding the right firm can put young advisors on the path to ownership and to take over an established advisory business.
Being involved in a succession plan isn’t the only way to achieve long-term success in the industry. Starting as a financial advisor now will give you an opportunity to build your client base, opening the door to launch your own firm one day!
There is no shortage of reasons to consider a career in the wealth management industry. When students think about caring professions, a few commonly come to mind, often in healthcare. While the financial planning industry doesn’t typically make the list, it is an industry focused on helping people. Advisors help people save and grow their assets so they can achieve their financial and personal goals.
On top of all of these benefits, you truly get out of the financial advisory profession what you put in. Your compensation isn’t based on showing up and getting promoted, it’s based on doing right by your clients, building your clientele, and growing those clients’ wealth. You can forge your own path and reach great levels of success.
Do You Want to Be Part of the Solution?
If you’re considering a career in financial services, or if you know any students who are exploring that path, we recommend you look into your options in the financial advisory industry. The next generation of financial advisors are now entering the workforce, and top advisory firms are looking to attract diverse talent from colleges nationwide.
If you’re interested in learning more, Diversitas is hosting a virtual symposium on November 3rd where we’ll dive into these opportunities in more detail. We’ll address how young and diverse individuals can find success and make a real impact on the financial advisory industry, and why now is the perfect time to become a financial advisor. For more information, please register at our website’s Event Page.
1 “2019 U.S. Financial Advisor Satisfaction Study.” J.D. Power, 9 July 2019.
2 “The Great Wealth Transfer.” Cerulli Associates.[vc_widget_sidebar sidebar_id=”default” el_class=”post-sidebar”]