With more than a third of financial advisors looking to retire over the next decade, it is critical for the industry to attract and retain new talent, warned Boston-based research firm Cerulli Associates.

In its research, titled “U.S. Advisor Metrics 2023,” Cerulli said the industry stands to lose 109,093 advisors, or 37.5%, to retirement over the next decade and 41.5% of total assets. On top of that, the firm estimates that there’s a five-year failure rate of around 72% for rookies.

The urgency to attract advisors is more evident in the measly number that joined the industry last year. According to Cerulli, the advisory population grew by just 0.3% to 2,706 in 2022, “largely unchanged in 2023” and this “barely offsets trainee failures and retirements.”

This stagnant growth has been ongoing in the industry over the last decade, Cerulli said. The research firm projects that the total advisor head count will rise from 290,791 to 292,267 by 2027. The one bright spot in its numbers has been the independent RIA channel, which has seen growth of 10.6% year over year.

The wirehouse channel, on the other hand, has been losing advisors at the fastest rate. Cerulli projected that it will continue to lose head count market share, “falling from 15.1% to 13.4% over the next five years.”

Even if wirehouses have been losing share of head count, they still hold a significant lead in retail advisor-managed assets. Cerulli said that of the $26.8 trillion in total advisor-managed assets in 2022, more than a third (34.1%) was attributed to wirehouse advisors.

To address the low success rate of new advisors, Cerulli said, firms “must grow their talent pipeline and better communicate the role and training time line of a financial advisor.”

“A strong partnership between a rookie advisor and their firm is often a key reason behind successful development,” Cerulli associate director Andrew Blake said in a statement. “Rookies rely upon strong mentorship from their peers, exposure to successful financial advisors, and increased training on various financial planning topics. It is crucial for RIAs and B-Ds to continue to develop programs and training methods to aid rookies in financial planning and other skills to adequately prepare them as they embark upon a new career as an advisor,” he added.

Cerulli noted that the number of rookies entering the financial advice industry varies, with only 13% joining as the first job in their career, while 40% have experience working in the financial services industry. “To this end, professional networking and referrals could be as critical for firms building a pool of potential advisor candidates as it is for those looking to become financial advisors,” Cerulli’s report said.

The research showed that more than half of new client referrals (56.1%) came from clients, friends or family members. Referrals from other professionals, known as centers of influence, followed with 14.5%. Also, Cerulli noted that 32% of rookie advisors were referred by a personal contact.