What comes next for your firm?
In the financial advice industry, we’re facing an impending wave of retirements. Currently, the average age of a financial advisor is 56. As these advisors begin to retire over the next decade, we’ll encounter a significant shortage in the coming years unless we alter our approach to attracting the next generation of talent. According to recent McKinsey research, the number of financial advisors is expected to decline substantially over the next decade, and we’ll be looking at a deficit of 90,000 to 110,000 advisors by 2034.
This shortage is about retiring advisors, but it also addresses how we can successfully engage and train the next generation in the profession. It’s something we need to work on. New Cerulli Associates data shows that 70% of new advisors leave the profession within their first five years.
And to some extent, this is a problem for the entire financial advisory profession. It’s clear what has worked in the past won’t necessarily work going forward, and firms that take extra steps to succeed in this transition stand to gain — big.
Three ways to succeed at succession
If you’re wondering how your firm can prepare for succession in this landscape, don’t worry – we’ve been thinking about this for decades. Pilot collaborates with advisors to ensure they can choose the best option for their business. Here are three things financial advisors can do to ensure they’re ready for succession:
√ Recruit and engage the next generation
There’s no denying that the financial advice profession is aging and struggling to attract new talent. In fact, 45% of advisors are 55 or older, while only 9% are under 35. As an industry, we need to consider how we can more effectively reach out to and engage younger generations to make a career as a financial advisor a viable option. We can become ambassadors for our field, whether it involves inviting a younger family member to join the firm or reaching out to recent college graduates.
√ Plan for the transition
When a financial advisor retires, it’s important that the clients are comfortable with the transition. Unfortunately, 32% of firms have low to no confidence in the next generation of advisors’ readiness to take over leadership or management.1 After deciding who will take over your practice, including them in client-facing activities is vital. We recommend a 2–3-year gradual transition period, if possible. We find that assisting younger advisors in building relationships with existing clients boosts their confidence and comfort in their new business. It also enables the exiting advisor to feel satisfied and valued.
√ Lean on institutional support from Pilot and LPL
There are a lot of moving pieces to the succession machine. Working with Pilot Financial, which is an affiliate of LPL Financial, brings several important support services and experts to your disposal:
- The LPL Advisor Institute helps aspiring advisors attain the necessary training certifications. It can be costly to get into this business, and incentives like fee waivers can make it more attractive for prospective advisors. If you’re interested, please reach out to your Pilot Financial Ambassador or the OSJ line at 336-346-1771.
- We’re always looking for new advisors! The Pilot Referral Program offers bonuses for bringing new advisors to affiliate with LPL. For every qualified referral, you can earn up to 4% of the referred advisor/team’s trailing 12-month gross dealer concession (GDC), up to $40,000!
- Pilot provides advice, legal resources through LPL, resources for securing financing for someone purchasing a practice, and can introduce retiring advisors to early-career advisors looking to acquire a book of business to establish their practice. While the advisors are always in the driver’s seat, we aim to make the process streamlined for clients and beneficial for advisors.
Don’t go at it alone
There’s no way around the realities of the financial industry pipeline: we need to plan and prepare for succession to maximize value. One of the benefits of working with Pilot Financial and LPL is tapping into our network and our expertise. When an advisor comes to us ready to retire and sell their business, they’ve never done it before … but we have. We are proud to bring our resources to you during this major transition.
Let’s talk succession! Reach out to discuss your practice and how Pilot’s expertise can help you plan for the future.
Source:
1https://www.planadviser.com/ria-succession-planning-hits-new-low/