100K FA Shortfall by 2034: McKinsey
The financial advisory industry is facing a significant challenge, with a potential shortage of 100,000 advisors by 2034, reported McKinsey & Co. This gap is largely driven by an aging workforce, as more than 110,000 advisors are expected to retire in the next decade. At the same time, the rate of new entrants into the profession is not keeping pace with retirements.
The report highlights significant growth in advisory revenues, which have risen from $150 billion in 2015 to an estimated $260 billion in 2024. This growth is driven by clients’ increasing preference for human advice, as opposed to purely digital or automated solutions. The trend is expected to continue, with the number of human-advised relationships projected to grow to 71 million by 2034.
Despite strong demand for financial advisory services, the advisor workforce has grown at a modest 0.3% per year over the past decade, according to McKinsey. This slow growth is expected to continue, with the workforce projected to decline by 0.2% annually over the next decade.
With the advisor population aging, retirements are now exceeded new recruitment, leading to a growing concern for the industry. If firms do not address this issue, the industry could face a talent crisis, potentially risking growth and disrupting continuity in client service. To bridge this gap, wealth management firms must prioritize two critical areas: boosting advisor productivity and expanding talent pipelines, the report said.
McKinsey also highlights the importance of engaging more female advisors, noting that women are increasingly taking on key financial decision-making roles. As women continue to accumulate wealth and influence in financial decisions, firms that prioritize diversity and attract more female talent will have a competitive edge.
“The industry is facing a monumental challenge—addressing a 100,000-advisor capacity shortage over the next 10 years—with no easy solution,” the report said. “Wealth managers will need to focus on attracting new talent to the industry, helping them be more productive and successful, and further increasing productivity of the mid-career and established advisor population.”