Financial Advisers and the Great Resignation

Wealth management firms struggling to attract and retain talent are facing challenges stemming from disruptions related to technology and the pandemic, according to J.D. Power.



Wealth management firms had been struggling to manage attrition among their financial advisers and attract new talent long before the Great Resignation, and a combination of technological and pandemic-driven disruptions have helped to make the challenge worse, according to J.D. Power.

The firm’s “2022 U.S. Financial Advisor Satisfaction Study” says adviser attrition risk has increased this year across all categories, with 15% of advisers at wirehouse firms and 7% of independent advisers now categorized as “at risk” of leaving their firms in the next two years.

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The study is based on responses from 3,039 employee and independent financial advisers and was fielded from January through May of this year.

While overall satisfaction among independent advisers is relatively consistent across all adviser tenure levels, it declines significantly among employee advisers based on the length of their industry tenure, the study says. Overall satisfaction is 741 (on a 1,000-point scale) among employee advisers in their first 10 years of tenure, but it falls to 689 among mid-career employee advisers and to 658 among those with a tenure of 20 years or more.

This represents a huge risk, the study notes, as experienced advisers accumulate significant assets that will very often leave the firm if the adviser departs.

“Advisers benefit enormously from their relationship with their broker/dealer firm when they begin their careers, in particular if the firm has a recognized and trusted consumer brand. Along with the brand, the training and support they receive are crucial for them as they build their book of business,” says Mike Foy, senior director of wealth and lending intelligence at J.D. Power. “However, after they have a critical mass of clients and a professional network, they can usually sustain growth through referrals that are more a function of their personal brand and relationships. Many advisers believe the balance between what they are giving and getting their firm has shifted considerably.”

The study found that a majority (62%) of advisers said their preferred work style is either in the office most of the time (38%) or in the office full-time (24%). Overall satisfaction scores are highest among advisers who are currently working in the office full-time (791), followed by those who are working in the office most of the time (778).

“With the average age of a financial adviser climbing to 57 this year, wealth management firms that want to continue to grow must do more than just manage adviser attrition rates; they also need to actively create adviser brand evangelists who will attract the next generation of talent,” Foy said in a press release. “Firms that are making the right investments in technology, effective marketing support, competitive products and services and have a strong top-down corporate culture are significantly outperforming the competition when it comes to adviser satisfaction and advocacy.”

Among advisers classified as brand evangelists—those with the highest levels of satisfaction and loyalty to their firms—91% said the technology offered by their firm has improved during the past two years, the study says. Additionally, 79% said their firm offers competitive products and services and 74% said their firm’s corporate leadership fosters a strong culture.

What It Takes to Prepare for Retirement

J.P. Morgan has released its annual ‘Guide to Retirement,’ bringing fresh insight into the saving and spending behaviors of retirees.



J.P. Morgan Asset Management has released its annual “Guide to Retirement,” providing a detailed update on the retirement landscape and new insights into the saving and spending behaviors of retirees.

Planning for retirement can be overwhelming, the report says, as individuals must navigate various factors over which they have different levels of control. Some factors are out of their control, such as market returns, tax policies, legislative actions and regulatory reforms. On the other hand, they do have some control over other factors, such as longevity or how long they work.

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According to the report, the best way to mitigate such wide-ranging challenges is to develop a comprehensive retirement plan and to focus on what can be controlled. This includes maximizing savings as early as possible, understanding and managing spending and being well-diversified from an investment and tax perspective.

Younger generations have had to take on more individual responsibility for saving and planning for retirement, the report says, in large part because companies continue to shift from defined benefit to defined contribution plans. Less than 10% of Generation Z will have access to a pension, while four in 10 Baby Boomers will. As the report notes, the demise of pensions raises the stakes when it comes to DC plan outcomes, and it increases the importance of efficient Social Security claiming strategies. There are also important questions for individuals to asks about the role of annuities in their overall retirement income plan.

Being financially successful in retirement requires consistent savings, disciplined investing and a plan, the report says. Analyzing how much of an investor’s income Social Security will replace is one important step in understanding if that investor is on track to afford her current lifestyle. It is also critical to assess the anticipated rate of return on invested assets and how this compares to inflation rates. If the amount falls short for their age and income, advisers and plan sponsors can help individuals develop a plan tailored to their situation.

Deciding how much to save for retirement depends on the investor’s circumstances, the report says. This includes their income, the age at which they start saving and the lifestyle they have become accustomed to. For a 25-year-old making less than $90,000, the necessary annual savings rate ranges from 3% to 8%, depending on return assumptions and time horizons, while a 50-year-old man may need to save between 13% and 38% of gross income to achieve the same outcome. These figures demonstrate how early savers have a much better chance of achieving retirement success.

The report emphasizes the importance of moving beyond a pure focus on savings and creating a rational spending plan for retirement. Most Americans’ peak spending years are at midlife, and thereafter spending tends to trend downward, until it trends up again at the oldest ages, the report says. The largest expenditure category at all ages is housing, while the category that older people spend significantly more on than younger people is health care. Housing and health care expenses may increase late in life due to the possibility of needing long-term care.

During periods of higher inflation, it may make sense for retirees to revisit their planning forecasts, though different households do not experience inflation to the same degree, the report says. When planning for retirement, advisers should use a long-term inflation assumption for spending that reflects what the household actually buys and how that will change with age.

For example, transportation was the highest inflation category in 2021 at 21.4%, the report says. Households older than 75 spend 4.5% less on transportation than households ages 35 to 44, and therefore they may not experience this high inflation to the same degree.

Health care expenses grow in retirement, and those with access to a health savings account can take advantage of the tax-free or tax-deductible contributions, tax-deferred earnings in the account and tax-free withdrawals for qualified health care expenses, the report says. The best way to take advantage of the tax-deferred compounding is to pay for reasonable health care expenses from funds outside of the HSA and instead wait to use the HSA for retirement.

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