Everybody knows the financial advisor industry is growing. The Bureau of Labor Statistics projects that the employment of personal financial advisors will grow 15% for the decade from 2021 to 2031.

But not all sectors of the industry are equal. The bank broker-dealer channel has seen stagnating growth in advisors head count, according to new research from Cerulli Associates.

While the independent RIA channel saw a 4.4% in compound annual growth rate in advisor head count from 2016 to 2021, and the hybrid RIA space saw 2% growth, the retail bank B-D channel saw only 0.7% growth. Even though the bank B-D channel has seen its assets under management log an 11.7% compound annual growth rate in those five years, a stalling head count means the banking industry is going to need to make changes to adapt.

“Shifting market dynamics and competing advisory business models are putting significant pressure on banks’ and credit unions’ ability to attract and retain advisors,” said Chayce Horton, research analyst, in a statement. “Banks need to be able to compete with other advisory channels, such as the registered investment advisor channel, which has outpaced the broader wealth management industry in terms of AUM and advisor head count growth.”

Part of the reason this is critical is that banks are starting to feel the heat on their deposit business. According to the Federal Reserve, commercial bank deposits fell to $17.1 trillion for the week ending May 10, a $26.4 billion drop in a week, and an almost $1 trillion decline from last year. That’s put pressure on banks to continue ramping up their wealth management business.

Cerulli released these results in a white paper it announced last week, called “Improving Recruitment and Retention Throughout Advisors’ Lifecycles: Uncovering Opportunities and Best Practices Within Banks.” Cerulli produced the paper with BISA, the Bank Insurance & Securities Association. The paper deals with retail banks, retail bank brokers and credit unions.

“The paper finds that attrition risk presented by aging advisors is considered one of the greatest threats to bank wealth programs today,” Cerulli said. “Bank advisors, on average, expect to retire at the age of 64 (four years earlier than peers in other channels); yet nearly one-third (29%) of bank advisors transitioning into retirement within the next 10 years are unsure of their succession plans.”

Horton, in a separate interview with Financial Advisor, said the firm counts 24,000 advisors at retail bank B/Ds currently. He said the most attractive thing about the bank channel for both junior and mid-level advisors is the steady stream of referrals that it provides—so many that it outweighs the fact that payouts might be slightly less than they are in the independent broker-dealer channel. But on the negative side, the banks tend to own the client relationships.

“That’s one of the points we found that makes it difficult for these banks to keep advisors throughout the entirety of their career,” Horton said. “Because they see in pretty much every other channel there is some degree of ownership of the client. But we found that at least for the first half of an advisor’s career, the steady stream of referrals ... and the need to not do any sort of cold calling or anything like that, we found that that outweighs it.”

But when advisors begin the second half of their career, he added, “that’s where banks really do have difficulty and we see a lot of advisors leaving the bank at that point and taking whatever proportion of the book they can to an independent channel or another B-D for a higher payout. So that’s a key problem negatively impacting bank wealth management, credit union wealth management programs.”

To fight this, banks can add second-story programs where an advisor can forgo referrals in exchange for a higher payout, he said. “They get to keep their book but they get paid a little bit more,” he said. Another helpful thing is to have monetization options for when an advisor retires where there is some payout based on the last 12 or 24 months or some sort of payout based on what percentage of the book stays at the bank after the advisor retires. These sorts of deals are currently made off-the-cuff as the advisor exits, Horton said.