In Practice February 6, 2013

Teamwork Key to Attracting Next Gen

With 237,000 advisers on track to retire in the next decade, a Pershing survey uncovers the priorities of advisers age 25 to 39.

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Teamwork, technology, financial success and a distinct career path are the main concerns of the next generation of advisers, and addressing these points will be critical to the continued success of financial advisory firms, the survey of 357 advisers found.


Every year for the next 10 years, 12,000 to 16,000 advisers will retire. “It is evident that the financial advice industry will face a talent shortage in the coming years,” said Kim Dellarocca, director of segment marketing and practice management at Pershing. “Each day, the industry sees young advisers exit the industry and never return. Firms need to think about how to recruit and retain younger advisers by understanding their drivers and motivations—and convey to them that being an adviser is a rewarding and fulfilling career.”

Financial gain is more of a motivator for younger advisers in the 25 to 39 age bracket (23%) than those 60 or older (12%). However, while the younger generation shares their older cohort’s interest in positively impacting the lives of their clients, this motivation is significantly lower for the younger generation than for those 60+ (59% versus 81%).

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The biggest divide between the two generations is the use of and familiarity with technology, with 85% of advisers 25 to 39 describing themselves as technology-embracing, compared with 56% of advisers 60+. The younger generation is also more likely to think of themselves as organized (75% versus 63%), go-getters (48% versus 44%) and team-oriented (44% versus 29%).

Younger advisers report stronger growth in their business—42% in the 25 to 39 bracket say they are doing better than before, compared with 15% of those 60+. “Interestingly, those who report they are doing better than ever before are significantly more likely to also report that their firms provide opportunities for advisers to advance their careers,” Pershing said. “This indicates that firms that provide clear advancement opportunities may also provide greater motivation for advisers to realize their full potential.”

Financial advisory firms must consider these factors when developing their succession plans, Pershing said. To find this talent, the broker/dealer suggests that advisory firms target younger wirehouse advisers, well-credentialed support staff at their own firms and fresh talent from colleges.

Data & Research February 6, 2013

More DC Plans May Add Roth Features

An increasing number of U.S. employers are planning to add Roth features to their defined contribution (DC) plans in 2013.
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New legislation makes it easier for DC investors to convert balances in their savings plans into Roth accounts, Aon Hewitt noted in a survey.

Just after the passage of the American Tax Payer Relief Act of 2012—or so-called fiscal cliff deal—Aon Hewitt conducted a pulse survey of more than 300 individuals from large U.S. corporations to determine the prevalence of Roth accounts and employers’ likely actions concerning their plans over the next 12 months.

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According to Aon Hewitt’s findings, almost half (49%) of respondents currently offer no Roth provisions. Of those that do not offer Roth provisions, 29% are very or somewhat likely to add this feature in the next 12 months. Of those new adopters, more than three-quarters (76%) will add both Roth contribution and in-plan conversion features.

Employers have steadily been adopting Roth features in recent years, said Patti Balthazor Bjork, director of retirement research at Aon Hewitt. “The new law, along with a better understanding of Roth by both participants and companies, will encourage more plan sponsors to add these options in the near-term,” Bjork said.

Employers that already have a Roth contribution option are likely to allow employees to make in-plan conversions to Roth accounts, Aon Hewitt’s survey found. Of those respondents that currently allow Roth contributions but do not offer in-plan conversions, more than half (53%) are very or somewhat likely to add this feature in the next 12 months.

For companies that already allow Roth contributions and in-plan conversions, more than three-quarters (79%) are very or somewhat likely to expand the eligibility for in-plan conversions, allowing them for previously non-distributable amounts.

“The new rules open the door for employers to allow expanded in-plan conversions, but it’s not a requirement,” Bjork said. “However, it makes the Roth conversions more attractive for employees, so there will likely be increased interest and incentive for employers to offer them.”

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