Wealth management firms have some retirement planning of their own to do: Their advisers' average age is just shy of 49 and 14% of advisers are over 60. Combine that with advisers' evolution from transactions to continuing fee-based relationships, and broker-dealers face a big challenge, according to a report released Wednesday by Cerulli Associates in Boston.
Aging advisers have more loyal clients, but it is hard for newcomers to build a business when potential clients won't jump ship as readily as they used to. Add to that outdated hiring and training practices by broker-dealers — "new hires are expected to start up their practices with little more than a cubicle and a phone book," the Cerulli report said — and the industry holds little appeal to newcomers.
That's not to say there's no demand, of course. Around 10% of advisers change firms each year, and firms are losing another 5% or so to retirement. Cerrulli estimates that a company the size of Wells Fargo & Co., for example, must recruit 2,000 advisers per year just to keep pace with attrition. But the number of advisers keeps shrinking, falling 1.4% from 2004 to 2008 to a total of 309,693.
Rather than replenish the adviser pool by training newcomers, the industry remains focused on hiring from a dwindling number of high producers. That's good for top producers — signing bonuses are as high as 300% of trailing 12-month production for them. Broker-dealers also could take advantage of the situation by assigning new recruits to teams of more seasoned advisers who can show them the ropes, said Jeff Strange, associate director of Cerulli.
"Training programs are expensive," Strange said in an interview. "But in a team, senior members increase their production because new recruits can take over some financial planning and due diligence tasks while they learn about the nuts and bolts."