Bounce in Adviser Headcount First in Nine Years

Cerulli Associates finds the U.S. advisory industry’s total headcount across all channels increased for the first time in nine years during 2014—by 1.1%.

Kenton Shirk, associate director at Cerulli, says many positive developments led to the headcount growth last year. “From the adviser perspective, there is a heavier focus on teaming and onboarding rookie advisers into multi-adviser practices,” Shirk explains. Across the industry firms are eagerly hiring junior advisers, “so they can refocus their own efforts on their largest and most ideal clients. There is also greater awareness and concern about succession preparedness.”

The report finds advisers are feeling a positive sense of momentum for key business metrics for 2016, but the industry is “still not in the clear,” Shirk explains. Although there was an uptick in the number of advisers in 2014, Cerulli projects that the industry’s headcount will begin declining again in 2019.

Unless current trends quickly reverse, today’s modest headcount gains will be trumped by a sizable uptick in adviser retirements, Shirk continues. By 2019 the industry’s headcount will begin to decline once again, Cerulli predicts, and at an even more pronounced rate than in the recent years.

NEXT: Learning from past trends 

Cerulli’s reporting shows the financial advisory industry lost 12.7% of its total adviser headcount between 2005 and 2013, but in 2014, adviser headcount stabilized and even showed a small bounce by year end.

Not all segments of the advisory industry have seen the same growth or shrinkage. For example in the past five years the direct advisory channel experienced a 12% compound annual growth rate. Firms across the service spectrum are concerned about an aging client base—with 57% of advisers’ clients already older than age 60.

Comparing business models, Cerulli finds approximately 14% of “wirehouse mega team advisers” say they are “undecided about whether they will remain affiliated in the next 12 months, compared to 5% for all advisers across the industry.” For independent broker/dealers (IBDs), the appeal of the registered investment adviser (RIA) channel for large advisers is putting a drag on both revenue and profitability.

“In response,” Cerulli says, “numerous IBDs have introduced RIA platforms, allowing advisers to leverage their platforms while holding a separate and independent RIA.” Cerulli suggests this is an important move given that nearly two-thirds of wirehouse and regional advisers who changed firms in the past three years indicate that “concerns about the quality of their B/D’s culture” was a major factor influencing their decisions to move.

NEXT: Service model evolution 

Advisers report that 38% of their clients receive comprehensive written financial plans, and by 2018, they plan to increase this figure to 48%. The percentage of clients receiving no financial planning services is expected to decline 10%, Cerulli finds, highlighting the evolving adviser-client relationship.

Advisers are increasingly using (68%) “niche marketing techniques,” Cerulli says, and more than one-third (37%) of those advisers consider it to be a very effective marketing activity. Better than half (52%) of independent advisers who are planning to retire in the next five years have streamlined workflows in preparation, while another 45% have upgraded their technology. “Just less than half (43%) of independent advisers preparing for retirement have engaged a consultant to prepare,” Cerulli notes.

Encouragingly, approximately 28% of rookie advisers are female; this is higher than the average for the advisory industry as a whole of only 14%.

Information about obtaining Cerulli Associates research, including “Advisor Metrics 2015: Anticipating the Advisor Landscape in 2020,” is here.