The number of financial advisors decreased during the past year and Cerulli Associates anticipates the trend will continue through 2016.

During the past year, advisor headcount declined 1.3 percent due to terminations, retirements and advisors leaving the industry, says The Cerulli Edge Advisor Edition. Financial firms need to take steps to retain those in the profession and draw in new members, Cerulli says.  

The downward trend will continue, with headcount falling through 2016 by 18,600, the report says. The independent RIA channel is one of the few channels Cerulli sees as increasing as it gets advisors from other channels, says Tyler Cloherty, associate director at Cerulli Associates, a Boston-based research firm.

Dually registered advisors will increase by 5.3 percent and bank broker/dealers will increase by 1.5 percent.

Independent broker-dealers will lose the most with a decline of 5 percent over the five years, the report predicts, and wirehouses will lose 2.4 percent.

“Wirehouses continue to lose significant assets from advisor movement and have fallen short in replacing talent,” Cloherty says.

One factor affecting the number of advisors is the age of the current advisor population. For the next 13 years, 8,600 advisors will reach the average retirement age of 68 each year. This does not count the pending retirements of 24,000 advisors who are older than 68 and currently still working, Cerulli says.

Only 10 percent of advisors are under 35, which is not enough to replace those who will be retiring. This points to the need for additional training programs. Wirehouses are particularly vulnerable on this point because 6 percent of their advisors are under 35 but almost double that amount (11 percent) are 65 or older.

To help offset these losses independent broker-dealers and RIA firms should look at ways to recruit and retain advisors. Firms should provide business consulting, research, training manuals and human resources support to help locate viable candidates and retain existing ones.

Cerulli acknowledges that attracting new talent should be a high priority for a firm but not at the expense of losing existing strong producers. Cerulli estimates that 37 percent of the wirehouse and regional retention deals will expire in the next three years.

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