Succession Plan Dilemma

Aging advisor workforce races to find replacements – but are younger generations interested?

Despite a booming economy and the past decade’s unprecedented stock market run, America’s aging financial advisors might find themselves unable to secure their own replacements when they retire.

meehan quote“With one-third of financial advisors set to retire between now and the next 10 years, and not enough new financial advisors entering the business, the industry is facing a shortage of over 100,000 advisors to tend to the needs of people who really need help with their finances,” said Dan Meehan, SVP Business Development at Kalos Financial. “Many universities have become known for their financial planning programs, but we need to do a better job of getting young people interested in our industry.”

 A lack of young people does seem to be the problem. The average advisor is 50 years old, and only 5 percent of the industry is under 30, according to consultancy firm EY. Financial advisor also remains one of the most difficult jobs to fill, coming in second-place in a 2017 ranking by Their report, which was based on Bureau of Labor Statistics data and a study of job listings over the previous decade, also projected a serious shortage of advisors by 2024 as industry supply fails to keep up with demand.

“Close to 40 percent of advisors plan to retire within the next 10 years, leaving the industry scrambling to groom replacements,” said Marina Shtyrkov, an analyst at Cerulli Associates, in a 2017 statement that accompanied that firm’s report on advisor demographics.

The advisor shortage also comes as the greatest intergenerational transfer of wealth in history is underway. Millennials stand to inherit large portions of the $30 trillion retiring baby boomers are expected to leave behind as they die. Studies, meanwhile, show millennials as more skeptical of financial institutions and less interested in using a financial advisor. To attract millennial investors, some industry watchers suggest hiring advisors who look like them, something that has not happened in large numbers.

Many experienced advisors also fear that millennials, who appear disinterested in financial planning and advising, never experienced a significant economic downturn as adults – most millennials were children or teens during the 2008 financial crisis.

goodridge quote“I think that the issue with millennials is likely that they have been in the financial industry mainly during a bull market cycle, so that their understanding of market risk and asset allocation lacks the depth of perspective that older advisors have,” said Julie Goodridge, the chief executive officer and founder of NorthStar Asset Management, Inc., based in Boston. “The experience of ushering a range of clients and their respective reactions through tough economic times into better times is a major learning experience.”

Some advisors, concerned with business succession, have sought out new talent. Bart Zandbergen, CFP, a senior wealth advisor at Optivest Wealth Management, based in Dana Point, California, began a search for a new partner and hired a 36-year-old female advisor who he believes balances his firm’s offerings.


“I feel that together, we have created an undeniable team. If a client feels more comfortable working with a female, we got it. If they prefer a male, got that. If they are comfortable with an advisor with some grey hair – got that. And if they prefer a more millennial point of view, we have that too,” Zandbergen said. “The other thing I have accomplished is to give my existing clients some peace of mind that if, or when, I should decide to slow down or retire, we have a great transition plan.”

Millennials and Generation Z, which is currently in high school and entering college, approach work differently, often seeking jobs that they find to be rewarding over remunerative. The financial services industry needs to make its case that advising is meaningful work.

“Young people may have been a bit disillusioned by the great recession and the Madoff scandal, but our industry is still dominated by caring individuals who truly care and work in the best interests of their clients,” Meehan said.

And, of course, with multiple generations in the workplace, conflicts are bound to happen.

reza300x300“The older advisors are not embracing the new method of financial planning and investment advisory, and thus their clients are not educated on the methods,” said Reza Zamani, senior partner at SteelPeak Wealth, based in Woodland Hills, California. Zamani added that young advisors have their own hurdles to overcome as well.

“The younger advisors right out of college have the book knowledge, but do not have the work ethic,” he said. “ I am sure there are some that do, but I am referring to the majority. The issue is that millennials have different expectations of work/life balance and, unfortunately, this is a career where you need to work … much more than nine-to-five, in order to provide to clients what they need regarding their family financial needs.”

Advisories also will need to develop work cultures that leave employees feeling that their work is meaningful. Mentoring programs can be a first step toward building a strong work culture and solving problems before they start.

Kruspe quote“Encourage each generation to mentor the other. They each provide different strengths, experiences and knowledge of today’s technology,” said James R. Kruspe, ME, MBA, principal of Profit Solutions Group, LLC, based in Florence, Kentucky. “Inclusion helps to use those differences as leverage to maximize results. Most employees’ value being included versus excluded. Inclusion will foster teamwork. Teamwork leads to achieving results faster.”

“Regardless of our differences, the important things we remain solid and in sync,” Zandbergen said. “Clients best interest is first and paramount.”


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