Financial Advisory Firms Facing a ‘Talent Crisis’

College costs are escalating. Out-of-pocket health care expenses are rising. Weddings can cost more than many people earn in a year. And millions of baby boomers are facing retirement.

But at a time when the cost of living seems overwhelming, there likely will be many fewer experts to help plan for those life events. Financial advisers are retiring at a rapid rate, while few new college graduates are interested in replacing them.

That’s left many managers and owners of financial advisory firms wondering how they will replace retiring advisers, including themselves.

“There is a high demand for advisers as over 10,000 baby boomers are retiring every day,” said Holly Gallagher, the principal of Horizon Financial in Traverse City. “At the same time, the average age of advisers is in the late 50s and they’re thinking about their own plans for retirement and business succession.”

The number of financial advisers in the United States has fallen for five straight years and is down about 12 percent since 2008, according to Cerulli Associates, a Boston-based research group.

For every eight advisers that retire, only three are being trained to replace them, according to a 2014 Fidelity Investments report that warned of an impending “talent crisis” in the industry. Cerulli estimated that 8,600 advisers could leave the business annually for the next 13 years, shrinking the workforce by 1.7 percent a year.

“Everybody’s book of clients is growing, so there is a need to bring on new people to team up with seasoned advisers,” said Matt Russell, branch manager at Wells Fargo Advisors in Traverse City.

Russell recently promoted one person in his office to be an adviser and is in the process of hiring two more. But he and others say it’s difficult to find young people interested in entering the field.

Some attribute that to the distaste many have for Wall Street because of such things as the big-bank bailout earlier this decade, perceived uncontrolled greed in the industry and the massive Ponzi scheme run by Bernie Madoff, a financial adviser.

“The whole Wall Street thing holds no shine for anybody anymore,” said Kirt Kilbourne, manager of Wedbush Securities’ Private Client Services office in Traverse City.

Attracting, Training Talent

Others say the industry has not done a good job of attracting young talent and providing the necessary training. Financial advisers typically need a bachelor’s degree, but many college students aren’t aware of opportunities in the field. The Fidelity study found that only about 17 percent have any familiarity with the financial advisory profession.

“The industry is not a natural gateway for finance students, said Naveen Khanna, chairman of the finance department in Michigan State University’s Broad College of Business. “There’s a lack of awareness about it.”

Few university finance departments offer minors in wealth management that would prepare students for careers as financial advisers, he said. Next year, Michigan State will offer a specialization for finance majors in insurance and risk management that will include courses in wealth management. The university also is considering offering a wealth management minor.

Khanna said another problem in preparing students for careers as financial advisers is that there is no industry standard on what kind of training is required.

“There’s a disconnect between the universities and the industry,” he said. “There needs to be a meeting of the two.”

Some large securities and financial advisory firms have started their own training programs to prepare for the impending retirements of seasoned advisers. Smaller firms say they’re looking to raid talent from accounting and law firms, as well as other competitors.

Raymond James & Associates Inc. has a paid, two-year “intense training program at the end of which the advisers are not only technically ready from a financial perspective, but also skilled in networking and making key connections,” said Jeffrey Pasche, senior vice president of investment in Raymond James’ Traverse City office.

A More Complex Industry?

Others say the nature of the financial advisory business has changed, making it more difficult for young people to enter the industry.

Gallagher said when she started nearly 25 years ago, “a college degree, passing a few tough licensing exams, some product training, a phone and a Rolodex (or a shoe box with index cards) with some 150 to 300 names to call is all you needed.”

Today, trying to find clients by cold calling them to buy a stock and making a living at it is virtually impossible.

“Nobody does that anymore,” Russell said. “Clients are looking for an adviser they can trust, not someone who catches them at the right time during a cold call.”

He and others say new advisers need to break in as part of a team led by a veteran adviser. It can take years before a new adviser builds the skill and trust to assume a significant share of the team’s client portfolio.

Financial advising also is a more complex business than it was when today’s crop of veteran advisors broke into the business decades ago.

“With increases in technology, the 24/7 news cycle and heightened scrutiny by regulators, there are a lot more hoops you have to jump through to make it in the industry,” said Damian Lockhart, branch manager at Morgan Stanley Wealth Management in Traverse City.

Still, he said, being a financial adviser is “one of the only careers that will allow you to create your own business with very little start-up capital, and provide advice, products and services that everyone needs.”

Earnings for financial advisers vary widely and a steady paycheck for advisers can be elusive for years while they build up a base of clients, said Wedbush’s Kilbourne. But it can be a lucrative career for those willing to work hard and stick it out, he said.

There were 160 personal financial advisers in northwest Michigan last year earning an average wage of $124,330, according to the Bureau of Labor Statistics.

Pasche said he thinks more young college students would consider becoming financial advisers if they could see the positive impact advisers have in helping others attain their financial goals.

“If millennials understood the impact they could make on a family when guiding them though financial decisions, and the flexibility they would have to build and run a business at a firm like Raymond James, or another firm, we would have more people seeking this out as a career,” he said.