New financial advisors face some daunting challenges such as learning the industry, getting their licenses, and building a book of business. Last year, headcount in the industry only grew by 2,579 advisors with a failure rate of more than 72% for rookie advisors.
This highlights the succession crisis that is facing the industry. Over the next decade, it’s estimated that 37% of all advisors, representing 39% of total assets, will be retiring. And among this group, 26% have no succession plan in place. While this is a major challenge for the industry, it’s an opportunity for savvy advisors.
For firms, some strategies to improve rookie advisor retention is through a structured training program. Firms will have to invest in developing and retaining their own in-house talent rather than the previous growth model of recruiting advisors from competitors.
Another constraint for firms looking to boost their recruitment efforts is that currently most new advisor recruiting is through word-of-mouth referrals. However, these types of informal methods will certainly overlook many qualified candidates outside of these networks. Therefore, firms must be more proactive in educating young people about this potential career path.
Finsum: The financial advisor industry is facing a challenge as many senior advisors are nearing retirement, while recruitment of new advisors has been lacking.