The torch is being passed from boomers to the Gen Xers as leadership of registered advisory firms trends younger, according to a report by FA Insight.

The report found that the median age of firm associates, overall, dropped to 42 from 44 in 2015, while the median age of lead advisors is now 46 years, down from 50. The study also found that the number of owners who are 40 years of age or younger equals the number of firm owners who are over 60.

The report also found that with a median age of 49 years – three years younger than in 2015 -- six out of 10 firms have at least one owner who expects to stay at the helm for at least another 12 years.

In The 2019 FA Insight Study of Advisor Firms: People and Pay, researchers found that firms continued on their growth trajectory in 2018. The report showed that client growth for the typical firm, at 7.4%, just missed topping last year’s record and exceeded every other year dating back to the first FA Insight study in 2009.

Firm revenue, which is being attributed the growth to efficient operations management and the increase in productivity from associates in revenue-generating roles,  also grew at a median rate of 14.3%, above the 12.1% average rate, while operating profit margin increased from 20 percent to 21 percent, the report showed. Revenues generated by revenue-generating roles were up 14 percent to $547,000 in 2018, while annual revenues per full-time equivalent (FTE) were up 13 percent ($228,523) over a two-year period.

The rate of growth for AUM dropped to 5.9 percent, but the report noted that advisory firms anticipate closing out 2019 with record growth rates in terms of their ability to onboard new clients. Growth in AUM is expected to rebound significantly, the report said.

The report pointed out that a typical firm’s operating profit margin, at 21% last year, rose by more than a percentage point from 2017, and overhead expenses as a share of revenue fell slightly in 2018. This includes an increase in income for firm owners, whose median total income rose 3.6 percent in 2018 to $633,000, the highest since 2014.

Firm owners remain confident about continuing growth in 2019 and are investing in senior-level experience. In fact, 22% have brought at least one new owner into their firm between 2017 and 2018.

The report said that advisory firms anticipate doubling their hiring rate in 2019 compared to 2018, with 61 percent making at least one hire last year. The largest firms plan to increase headcount by 10 to 12 percent, bringing on board seven full-time employees.

In terms of diversity, the report pointed out the opportunity lies for the majority of firms in adding more team members from underrepresented groups. Also, it said firms could benefit from having more women in revenue generating and leadership roles.

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