At the end of 2017, the average age of financial advisors in the United States was 52, which, for many advisers, means that retirement is in the not-so-distant future. Over the next 10 years, roughly 37% of advisers are expected to retire, which would put almost 39% of industry assets in motion, according to a report by Cerulli Associates.
Partly as a result, Cerulli projects that total adviser headcount will decrease 1.4% between year-end 2018 and 2023.
The wirehouse (40.7%), independent broker/dealer (IBD) (40.7%), national and regional broker/dealer (B/D) (39.7%) channels have the largest portion of advisors who are planning to retire and transition their businesses within the next 10 years. Meanwhile, the hybrid registered investment advisor (RIA) channels (31.1%) and bank B/Ds (24.7%) have lower rates of advisers retiring within the next 10 years.
While some progress is being made, the industry is struggling to recruit and retain adviser talent that is adequately prepared to inherit the businesses"
Similar to the attention being paid to the pending wealth transfer that is set to see $68trn in assets change hands between generations over the next 25 years, the industry is attempting to adapt to a changing of the guard amongst its own advisers. 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.
Michael Rose, associate director of wealth management at Cerulli, said: "While some progress is being made, the industry is struggling to recruit and retain adviser talent that is adequately prepared to inherit the businesses."
In an effort to overcome this challenge, firms are boosting recruiting efforts to bring new advisors into the industry and revamping training efforts to improve success rates.
"Just as importantly, B/Ds are working to create attractive succession options for advisors approaching retirement," Rose added. "It will be increasingly important that firms operate successful training programs in order to attract and train qualified advisers, integrate these younger advisers within teams for whom they can serve as a pipeline of potential successor candidates, and operate effective business succession programs for retiring advisers."