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Older And Younger Advisors Prepare For The Great Transition Decade



Industry experts say the time has come for financial advisors to prepare for a wave of change about to hit the insurance and retirement distribution channel as tens of thousands of advisors prepare for retirement over the next few years.

Most advisors will forward their advisory shops to successors, sell their businesses or simply shut them down. There will be a number of people who enter the industry, and plenty of movement within the industry as advisor teams move from wire houses to regional brokers, and as smaller advisories are swallowed by the regionals.

The bulk of the action, though, according to industry commentator Michael Kitces, will take place as talent leaves the industry. Industry observers say that advisors of all stripes can expect to hear more about the talent shortage in 2014, as companies scrounge for new blood.

The average age of all financial advisors working in the industry is 50.9 years, said a recent report by Cerulli Associates. A full 43 percent are older than 55 years old, and nearly 33 percent fall between 55 and 64 years of age, the Cerulli report said.

Ambitious advisors with five or 10 years of experience and an eye to leading a practice need to think deeply about how they approach their development, according to Mindy and Howard Diamond, the founders of Diamond Consultants, an advisor recruiting company in Chester, N.J.

Managing director Howard Diamond said that advisors who want to lead a practice shouldn’t strive to be all things to all people. “A generalist might not be the best thing in today’s society,” he said.

Better to take some time and “figure things out,” he added.

Does this advisor want to target the middle-income, the mass affluent or the high-net-worth market? Does this advisor want to serve a retail consumer, or would the advisor be better off serving a slice of the professional market: skilled tradesmen, general contractors, nurses or lab technicians, for example.

What about the revenue model? Do advisors prefer the fee-only model, the commission-based model or a combination of the two? Or, how about a flat fee of $200 for a young Gen Y college graduate who may develop into tomorrow’s entrepreneur and with whom the advisor can grow?

All these questions need to be answered before making a move, Diamond said -- in other words, have a plan. Sound planning will make it easier to find a successor, and for the successor to take over a practice. “This is the year of succession talk,” Diamond said.

Brian Heapps, president of John Hancock Financial Network, parent of broker-dealer Signator Investors, said in a news release that although the industry has been discussing succession issues and developing programs, “clearly the need to do more continues.”

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Howard Diamond said there are pros and cons to internal and external candidates. Diamond said that choosing an internal candidate groomed to take over the practice is often the best course for a retiring proprietor because the new leader is familiar with client needs.

But external candidates can refresh a practice by inserting some new thinking. On the other hand, there’s a risk the external leader will not work out, alienating clients who take their business elsewhere.

“If you’re lucky enough to find a young advisor and it fits in with your succession plan, that’s terrific,” Diamond said. “Unfortunately, it doesn’t always happen.”

Wire houses used to provide a consistent training ground for the next generation of talent. Even if advisors couldn’t turn a profit for several years, they were seen as a long-term investment and kept aboard, he said.

That is no longer the case. Training programs ebb and flow with the economic tides. It’s more common for wire houses today to ease advisors toward the exits if they don’t meet deadlines or generate enough revenue.

Advisors with backgrounds in consulting, accounting or law may add immediate value to a smaller shop looking for talent, Diamond said.

Much of the training today remains a seat-of-the-pants exercise, and advisors still learn the ropes at a small company and work their way into larger advisories. Or, young advisors end up as part of a team within a large wire house with vast resources.

Whatever the path, experts say that advisors need to do their homework well before veteran proprietors shut the door and turn out the lights.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

© Entire contents copyright 2014 by Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from


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