Strategy

The "Hidden" Issue Behind An Aging Advisor Workforce

Eliane Chavagnon, Reporter, 3 July 2012

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The World Wealth Report 2012 highlights that although the median age of high net worth individuals is declining the same cannot be said of advisors.

The World Wealth Report 2012 highlights that although the median age of high net worth individuals is declining the same cannot be said of advisors.

While older, successful advisors play a “crucial role” in maintaining and expanding the existing client base, as well as “grooming” young advisors, the Capgemini/RBC report warns that essential client needs could go unmet if the more “tenured” advisors opt for advisory methods which don’t resonate with younger HNW individuals.

“Firms will therefore need to map advisors to the appropriate category of clients to ensure the relationships are well-matched, and perhaps develop a younger advisor workforce for younger HNW individuals to relate to,” the report recommends.

The notion that the average HNW individual is getting younger is significant because the current and next generation of advisors must adapt to clients’ changing financial needs and objectives.

However, the number of advisors in the US representing the 60 to 69 age range actually fell from 24.1 per cent in 2008 to 16 per cent in 2011, according to figures from the College for Financial Planning.

While this is an important find, the underlying issue is that high and ultra high net worth individuals tend to want “very sophisticated relationships and don’t necessarily want to work with someone who is up-and-coming,” Rowan Taylor, vice president at Capgemini Financial Services, told journalists during a media briefing on the global report.

With this in mind, it is somewhat unsurprising that data from Cerulli Associates shows that last year over one-fifth (22 per cent) of all advisors were in fact at least 60 years old.

"In the US, the financial advisory workforce is certainly aging across the board and even more quickly in specific segments. The average advisor age has crept from 48 to 53 over the past decade, implying limited recruiting of younger advisors," Chip Roame, managing partner at Tiburon Strategic Advisors, told this publication.

"The wirehouses have cut back substantially on recruiting programs and have also laid off many underperforming younger advisors. The net result has been a decline in the numbers of wirehouse advisors," Roame continued. "Similarly, the independent rep and RIA channels have aged. And very important, if the client assets of advisors are dollar-weighted, the average age across the board is closer to 60. The industry has a recruiting challenge."

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