Advisors Are Younger, But Firms Still Face Shortfall
Despite fears of an aging financial advice industry the average age of advisors is actually dropping, according to a recent report from TD Ameritrade Institutional. Nonetheless, wealth management firms still face a formidable hurdle to replace the revenue they stand to lose as experienced advisors retire, according to the report.
The median age of lead advisors has dropped from 50 in 2015 to 47 in 2017, according to a survey of 388 advice firms with at least $150,000 in yearly revenue, according to a press release from the company. In addition, close to a third of the responding firms are also going after recent college grads to fill revenue-generating roles, according to the survey.
Nonetheless, despite their licenses and credentials, recent graduates don’t bring the kind of production more experienced reps can generate from their existing clients, TD Ameritrade says. What’s more, the number of new hires isn’t likely to keep pace with the coming retirement of baby boomer advisors, according to the report. And while advice practices are trying to fill the revenue-generating roles, they’re finding it increasingly difficult, TD Ameritrade says. Median pay for lead advisors, for example, has dropped 7% annually since 2015, to $168,500, while support advisors’ pay rose by 6.2% annually in the past two years, the survey found.
To keep up, some firms are opting to form strategic partnerships and outsource, TD Ameritrade says. Six out of 10 firms, for example, are outsourcing various advice practice functions, from back-office support to compliance, tax preparation and insurance, according to the survey.
But 81% of respondents lack a documented plan for their firm’s future that includes a hiring strategy before roles need to be filled, TD Ameritrade says. And while the ratio of firms whose owners are three years or less from retirement age keeps growing, just 37% of respondents say they have a viable succession plan, according to the survey.
The research was conducted by TD Ameritrade from February through March.