The change occurred despite favorable demographic trends, according to the latest Cerulli Edge Advisor Edition—Recruiting Edition. “It seems surprising that an industry so remarkably poised to take advantage of the massive demographic shift of retiring Baby Boomers would actually be shrinking,” a new report says.
Not only are there fewer advisers active currently, those still working, and those entering the market, “are graying rapidly,” Cerulli says. During the 1980s, more than 62% of advisers were under age 30 when they entered the industry; so far during the 2000s only 53% of new advisers have been under age 30 when they started. Further, in 2007, only 3% of financial advisers was under the age of 30.
Part of the aging of the adviser population is because the job of financial adviser is increasingly becoming a haven for second-career professionals, Cerulli notes. Many people coming into the advising profession were from related fields: Of the 78% of advisers for whom being a financial adviser was not their first career, 15.1% were in sales in another industry, 7.3% were an insurance agent, and 6.5% were in accounting or were a CPA. However, the largest group, 31.7% of advisers, responded “other,” and were quite varied, Cerulli notes.
Although related professions (sales professionals, insurance agents, and bank/trust employees) make up significant amounts of new entrants, Cerulli research indicates that individuals in virtually any profession can end up as financial advisers if they so desire. The diversity of previous careers is, perhaps, best exemplified by two survey participants (both of whom have books of business greater than $200 million in AUM) whose previous professions were “Chinese food take-out container salesperson” and “trader in the scrap steel industry.”
In order to combat this trend, Cerulli notes that the industry needs to focus on programs that attract new advisers to become a part of existing teams.