The investment advice industry is graying and fewer young people appear to be choosing it as a viable career path.
According to a 2011 study by the Boston-based research firm Cerulli & Associates, the average age for financial advisors was 49.6. The study, which was reported in Investment News, shows that 22 percent of advisors were under 40 while only 5 percent were under 30.
For many young people considering careers in the financial services sector, this could be wonderful news. Millions of baby boomers are retiring or are on the verge of retiring and are therefore prime candidates for sound investment advice. The Bureau of Labor Statistics (BLS) projects that the demand for financial advisors will grow by 66,000 within the next eight years. That figure is 14 percent higher than it is for other financial occupations. Many banks trimmed their investment banking staffs because they just didn't have enough deals to go around.
Moreover, the BLS also reports a 4.3 percent decline in the number of financial advisors from the previous year.
But many people familiar with the industry say attracting young people to the profession is complicated by several factors, including the changing times, the emergence of financially sophisticated customers and the lack of clearly defined career paths for financial advisors at many large financial institutions that drop them if they don't reach a specific performance bar after five years.
“It is tougher than ever to begin in this job,” says Danny Sarch, president of Leitner Sarch Consultants, a White Plains, N.Y. executive search firm specializing in the financial services industry.
“In this new media age, there is more data available. People are more sophisticated than they used to be. Even as recently as 10 years ago, you could pound the phones with cold calling,” Sarch tells eFinancialCareers.
But the presence of the “Do not call” lists, the fallout from the Bernie Madoff scheme and Internet scams has made life much harder for novice financial advisors, says Sarch, who also writes a blog called the “From the Headhunter.”
Alexey Bulankov, a 34-year-old certified financial planner who has worked as a financial advisor for 13 years, says the odds are stacked against young advisors. He says many burn out after two or three years of fruitlessly trying to find wealthy clients.
“The problem is if you’re a young guy, you don’t have any friends who are millionaires you can bring in,” says Bulankov, a veteran of several big firms who now works at McCarthy Asset Management, a boutique firm in the San Francisco area. “Cold calling only gets you so far.”
Then there are the difficult work conditions, which include a relatively modest stipend for the first year or two of employment followed by commission-only compensation and the difficulty of meeting production targets. The success rate of young financial advisors is 10 percent to 20 percent, Sarch says.
Gabriel Trasatti, a CPA, personal financial specialist and wealth manager at Pinnacle Advisory Group, says the demographic trend is problematic to both the industry and to consumers.
“As older financial advisors retire, they lose the ability to pass the knowledge to the younger generation, and then they are not able to pass it on to the firm’s younger advisors,” says Trasatti, adding that having a stable corps of young advisors is critical to building long, steady relationships with young, emerging affluent clients.