The magnitude of the potential advisor shortage over the next two decades-as the number of individuals aged 65 and older climbs from 42 million to 110 million people-is glaring. In the last five years, Cerulli estimates the number of advisors and brokers delivering financial advice has slipped from about 350,000 to 315,000.
This rate could accelerate as older advisors start retiring. "The rate of attrition is greater than the rate of addition," Tibergien says.
If 12,000 to 16,000 advisors retire every year for the next decade, that would translate into about 216,000 professionals exiting the business. The good news is that there will be a huge oversupply of clients for those who remain.
But it's clear that even if one combines the advisory and brokerage businesses, they aren't adding anywhere near that number of individuals. In fact, the brokerage business is declining while the RIA business is aging. Undoubtedly, a variety of new online entrants will emerge to pick up some of the slack and more young boomers and Gen X'ers may seek second-career opportunities in what has always been a second-career business.
Observers of the profession like Tibergien doubt its structure will resemble the current landscape a decade or two from now. He believes it could look somewhat like the accounting profession with a Big Four, followed by a number of super-regional firms, supplemented by a swath of mid-tier and smaller business units.
If companies like Montgomery Ward and Eastman Kodak can disappear, there is little doubt a lot of advisory and brokerage firms will as well. But true enterprises are emerging that have all the moving parts.
They will be positioned to capitalize on the growing supply of clients. So young advisors considering new careers might be well-advised to think twice, however they feel about their current employer.
Tibergien offered several tips for advisors looking to build firms for the future. Seek out the next generation of accumulators and focus on women. More than one-third of women with business degrees outearn their husbands, and 90% fire their husband's advisor after he dies. In the U.K., it is predicted that women will control 60% of the wealth by 2025.
Successful firms will have the following characteristics:
1. Clear positioning, meaning they know who their ideal client is.
2. A structure that supports their business.
3. They'll know what type of staffing they need.
4. They'll manage profitability on an active basis.
5. They'll have developed a systematic form of client feedback that truly assesses client expectations.