Tackling the problem of advisor retirement

Research shows different rates of planned transitions and how firms are shoring up their pipelines for succession

Tackling the problem of advisor retirement

Not everyone may be worried about the greying advisor workforce, but new research from the U.S. points to an ever-growing need for succession planning in financial firms.

Drawing from its annual survey of retail financial advisors, Cerulli Associates has found that 37% are expecting to retire over the next 10 years, potentially putting 39% of industry assets in motion.

Breaking down the statistics by channel, the study found the largest proportion of prospective retirees — those planning to retire and transition their businesses within a decade — among wirehouses (40.7%), national and regional broker/dealers (39.7%), and independent broker dealers (40/7%). The rates of planned retirements over the next 10 years were lower among hybrid registered investment advisors (31.1%) and retail bank broker/dealers (24.7%).

The picture grows more concerning with Cerulli’s finding that across all channels, 28% of advisors who plan to retire in the next decade expect an advisor in their practice to succeed them, while 22% have no plan.

“While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses,” said Michael Rose, associate director of wealth management at Cerulli.

Aside from boosting recruiting efforts to infuse the industry with new blood, firms have revamped their training efforts in a bid to improve retention rates.

Running parallel to this, an ongoing program by the CFA Institute has firms focusing more on diversity and inclusion programs, which are expected to broaden their pool of talent and prospective hires. Earlier this year, the CFP Board’s Center for Financial Planning also released a new guide that outlines clear career paths for financial planners.

Cerulli also noted that broker/dealers are doing more to create attractive succession options for advisors nearing retirement. The Wells Fargo Advisors Summit program, created earlier in 2019, purportedly grants participating advisors an additional 25% valuation on trailing 12-month revenue when negotiating succession opportunities within the firm. LPL Financial has also recently unveiled a program offering a portfolio of succession solutions to help advisors implement a plan for both planned and unplanned exits from their businesses.

In Canada, the issue of succession is also a pressing concern. The average age across all lines of business is threatening to reach 60 years old, with a reported estimate of $2.5 trillion in assets controlled by advisors in their 60s.


Follow WP on Facebook, LinkedIn and Twitter