The Cerulli Edge: Adviser Edition 3Q 2010 reports that between the end of 2004 and start of 2009, the number of financial advisers in the U.S. fell from approximately 314,000 to roughly 310,000.
The research stresses the fact that attrition rates can be expected to accelerate in the coming years; the current average age of advisers is almost 49 years, with approximately 14% over 60. When these advisers reach their own retirement date in the next few years, many clients – even their fellow Baby Boomers – will be left behind without qualified advisers to help them through the transition from the accumulation phase to a stable retirement income. In order to maintain current staffing levels, the industry must increase its hiring rates, but this challenge is compounded by the growing sophistication of the financial advisory industry.
The movement away from the comparatively simple transactions and commissions of the past to the more complex financial planning participants expect now has limited the possibilities of financial advisers starting up new practices. Because major broker/dealers and insurance companies have not evolved their hiring practices significantly in the past 10 – 20 years, many younger financial advisers do not have the foundation they need to meet the demands of their client base, according to the report.
As the Baby Boom generation approaches retirement, those investors will seek to transition from accumulation to payout. This process that will redouble the work required of financial advisers, requiring the design of more decumulation portfolios that take into account clients’ health care expenditures, tax situations, and the setbacks many faced as a result of the market crash, Cerulli says.
In order to meet the growing and changing needs of this retirement Cerulli generation, the traditional methods of hiring financial advisers must be updated and their rates increased, Cerulli maintains.