Graying of Wealth Management Ranks Has Demand for Financial Advisors Skyrocketing
Experienced professionals considering careers in wealth management and private banking are having an easier time these days due to the graying of the business.
One reason wealth managers continue to find themselves in high demand these days is that many financial advice givers are nearing retirement age, experts say.
The normal retirement age in the United States is approximately 63 years old, according to Center for Retirement Research data quoted recently by Boston consulting firm Cerulli Associates.
66,000 Financial Advisors Nearing Retirement
“More than 66,000 financial advisors are over 60 years of age and, thus, are approaching retirement,” Cerulli stated, estimating the assets controlled by these pre-retirees at $2.3 trillion.
"The retirement of advisors can mean a movement of assets, which represents both an asset-gathering opportunity and a retention challenge for both broker-dealers and asset managers," said Tyler Cloherty, senior analyst at Cerulli Associates.
“Demand for experienced advisors ‘is through the roof,’" as Howard Diamond, managing director of executive search firm Diamond Consultants LLC, told Investment News, and the graying of the advisor population is the reason why, he said. Unfortunately, he added, fewer firms have training programs to bring new people into the business.
Number Advisors Down 7 Percent Since 2004
The total number of advisors fell to 316,109 last year, from 323,566 in 2010, a 2.3 percent decline, according to Cerulli’s most recent annual advisor headcount. Compared with 2004, head count is down nearly 7 percent.
A Cerulli survey last year showed that 22 percent of advisors were below 40 and just 5 percent were younger than 30. The average age of advisors was 49.6, up one year from 2010.
Advisors among independent broker-dealers saw the greatest decline in their ranks last year, as individuals at poor-performing businesses decided it was time to retire or turn to another profession, Cloherty observed.
But even as the search for top talent has intensified, certain types of firms are being squeezed out altogether.
Consolidation of Assets
Assets are consolidating among a fewer number of advisors, according to Cloherty. “You're seeing lower producers getting bumped out as middle-market clients increasingly choose direct consumer providers like Fidelity or Schwab,” he's quoted as saying, adding that has also created increased competition among advisors for more affluent clients.
Ironically enough, “Despite years of planning their clients’ transitions into retirement, financial advisors are overlooking the importance of planning for their own retirements," Cerulli says in the third-quarter advisor edition of its publication, The Cerulli Edge.
“Due to psychological barriers, busy schedules and a lack of viable successors, succession planning is typically a neglected aspect of advisor practices. The situation is most dire for those advisors who are closest to retirement,” the report states. As a result, nearly 60 percent of advisors who are within five years of retirement anticipate a yet unknown buyer will purchase their practice, says Cerulli.