FA Industry Faces Shortage: Report

The number of financial advisors is gradually declining as trainees leave and veterans retire, underlining the industry’s critical need to attract and retain talent, cautioned Boston-based research firm Cerulli Associates.

Over the next decade, 109,093 advisors, or 37.5% of the industry headcount, will retire, taking with them 41.5% of the sector’s total assets, according to “The Cerulli Report – U.S. Advisor Metrics 2023.

The advisory population grew by just 0.3% to 2,706 in 2022, “largely unchanged in 2023” and this “barely offsets trainee failures and retirements.”

The wirehouse channel is shedding advisors at the fastest rate. Cerulli predicted that its head count market share will continue to shrink, “from 15.1% to 13.4% over the next five years.”

While 18% of respondents expect rookie advisors to succeed them, the survey predicts a five-year rookie exit rate of roughly 72%. As a result, the consultancy encouraged firms to build their talent pipelines and strengthen communication and training methods.

Only 13% of rookies join the financial advice industry as their first job after college, while 40% work in the financial services industry before getting a job as an advisor.

Professional networking and referrals are critical for firms to build a solid talent pool of advisors, with 32% of current rookie advisors having been referred by a personal contact, noted Cerulli.

“Rookies rely upon strong mentorship from their peers, exposure to successful financial advisors, and increased training on various financial planning topics. It is crucial for RIAs and B-Ds to continue to develop programs and training methods to aid rookies in financial planning and other skills to adequately prepare them as they embark upon a new career as an advisor,” said Cerulli associate director Andrew Blake.