Next Generation Producers
More advisers are in their 40s—and they are successful.
Reported by John Manganaro
As recently as 2013, he notes, Cerulli Associates reported the average age of financial advisers as 51. The firm’s research showed that 43% of advisers were over the age of 55, with nearly one-third falling into the 55 to 64 category.
Fast forward to 2019, and, according to a new TD Ameritrade survey report, “2019 FA Insight Study of Advisory Firms: People and Pay,” the average age of advisers has gone down meaningfully. The survey report suggests that the median age of advisory firm associates is 42, while the median age of lead advisers is 46.
Echoing the TD Ameritrade data, Slater says he has seen emerging evidence that younger advisers are generating quite a bit of the advisory industry’s overall growth.
“We commonly see advisers with at least 15 years left in their career who are already doing well for their practice,” Slater observes. “They’re having success selling in their 40s. Many are selling not just to maintain but also to grow the business.”
According to the data, the average firm’s operating profit margin last year, at 21%, was more than a percentage point higher than in 2017.
Further, the survey shows that overhead expenses as a share of revenue fell slightly in 2018.
This translated to rising income for firm owners, whose median total income rose 3.6% last year to $633,000, the highest since 2014, or 55 cents for every dollar of firm revenue.
Choppy markets have not shaken advisers’ optimism, even as growth in assets under management (AUM) has slowed. The median revenue growth rate for firms was 14% last year, up slightly from 2017, while the median client growth rate of 7.4% was little changed. The rate of growth for AUM dropped to 5.9%, according to TD Ameritrade.
Back to age, the survey found that the median age of advisers is 49—three years younger than when a previous edition of the survey was conducted in 2015.
At the same time, six out of 10 firms have an owner who expects to stay at the helm for at least another 12 years. The study also suggests that the number of firm owners who are 40 or younger now equals the number who are over 60.
“As the next generation of registered investment adviser [RIA] leaders comes to the forefront, they are investing in their firms and thinking about growth over a
long-term horizon,” says Vanessa Oligino, director of business performance solutions at TD Ameritrade Institutional.
“We expect to see pioneering approaches to industry challenges—whether they be staffing and compensation, growth and organizational design, or technology and innovation,” she says.
— John Manganaro
Art by Ellen Surrey