More than one-third of financial advisors are expected to retire over the next 10 years, putting almost 39% of industry assets in motion, according to a report by Cerulli Associates. Overall, about 37% of today’s advisors are expected to retire over the next decade; by 2023, the head count of advisors is projected to drop off by 1.4%, according to the report.
The numbers were most prominent in the wirehouse category (where 40.7% of advisors are expected to retire or transition their businesses in the next 10 years); in the independent broker/dealer channel (which also saw 40.7% of advisors set to transition); and the national and regional broker/dealer channel (which had 39.7% of the advisors planning to retire and transition), the report said.
But the report also pointed out that almost one-quarter of advisors across all channels who plan to retire in the next decade do not have a succession plan. Twenty-eight percent said they expect an advisor in their practice to succeed them.
At the end of 2017, the average age of U.S. financial advisors was 52, the report noted.
“While some progress is being made, the industry is struggling to recruit and retain advisor talent that is adequately prepared to inherit the businesses,” said Michael Rose, associate director of wealth management at Cerulli, in a report. “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.”
Rose added that B-Ds are working to create attractive succession options for advisors approaching retirement. “It will be increasingly important that firms operate successful training programs in order to attract and train qualified advisors, integrate these younger advisors within teams for whom they can serve as a pipeline of potential successor candidates, and operate effective business succession programs for retiring advisors.”
The Cerulli report noted that national and regional B-Ds have grown their assets under management the most over the past five years, with a compound annual growth rate of 6.5%. That was followed by retail bank B-Ds, which grew at a five-year CAGR of 5%. The national and regional B-D channel also saw an increase in total AUM market share from 15.9% in 2013 to 16.8% in 2018.
Cerulli’s research also confirmed a general trend that it has observed about advisors, who at a low but consistent rate have been leaving traditional B-D channels to join RIA channels, where many advisors see a greater opportunity for independence and business ownership.