A perfect storm is brewing across the broker-dealer landscape. As advisors retire en masse over the next five years, insufficient succession planning threatens an unprecedented drain of assets under management. Carriers that support financial advisory firms will suffer heavy collateral damage without a strategy.
Between advisors aging out and the bulge of postponed pandemic-era retirements, firms stand to have up to 50% of their AUM at risk between now and 2030. With the fewest number of advisors in generations available to take on increasingly complex client needs, outdated human capital development practices will sink many ships.
Carriers have a vested interest in their distribution partners’ success, and those that support these firms need a strategy to manage this transition. Here are four key steps they should take:
- Support centralized succession planning. Only about 40% of retiring advisors have a succession plan in place currently. Carriers should incentivize succession planning by offering discounts for firms that have robust, centralized programs. These programs create structures for retiring advisors to transition accounts to younger team members over 3-5 years.
- Promote team structures. Ensemble and multi-generational practices show higher rates of retention when senior advisors retire. Carriers should offer tailored products for team structures as well as training and recruiting support. Robust teams allow senior advisors to offload daily management while remaining available to advise on sensitive client matters.
- Spotlight next-gen needs. Younger and more tech-savvy advisors have different service expectations and restrictions in connecting with clients. Carriers should highlight regulatory and compliance support to help make this career path appealing. Unique affiliation models catering to next-gen advisors also provide incentives for recruiting.
- Reframe advisor prestige. The advisor role demands expanded emotional intelligence as clients’ needs grow more complex. Carriers should join in efforts to re-position financial advisor prestige, emphasizing the diverse skills the role requires. Reframing public perception as more “therapist” than “salesperson” also attracts a wider talent pool. Female and diverse advisors may be better able to connect with the next generation of clients.
The carrier ecosystem can actually emerge stronger on the other side of the brain drain. Siloed attempts to absorb this hit internally on a firm-by-firm basis will crush many under the weight of outsized client demands. Carriers providing purpose-built succession planning infrastructure, next-gen development pathways and updated talent positioning have the chance to consolidate market share.
In times of dramatic industry transition, leaders spot flashing warning signs early and make bold moves toward future success models. Carriers putting stakes in the ground now on human capital development will write the next chapter of financial advice.
