Rookie Financial Advisers Are in Short Supply 

In 2022, financial adviser headcount grew by just 2,579 advisers, while the failure rate for rookie advisers was more than 72%, according to the latest research by Cerulli Associates.  

The financial advice industry continues to confront a succession crisis, Cerulli reported. In the next decade, 106,264 advisers are set to retire, making up 36.8% of industry headcount and 38.9% of total assets under advisement. Among advisers retiring within the next 10 years, 26.3% are unsure of their succession plan.  

“Rookie advisers come from all different backgrounds,” Stephen Caruso, research analyst, wealth management at Cerulli, said in a statement. “Just 15% of rookies report financial adviser as their first career and only 43% of rookie advisers have previously worked in financial services.” 

Cerulli said key to rookie adviser success is structured training programs. Among new advisers, 45% reported that their responsibilities included managing small-balance accounts for a senior adviser. However, keeping rookies in a support role for too long can limit their growth, as well as their ability to develop their own clients, as 69% said they were tasked with growing their own client base from scratch.  

As firms face a shortage of advisers, they will need to focus on developing talent in-house, suggested Cerulli. Previously large broker-dealers grew their headcount primarily by luring away experienced advisers from competitors. Due to the pending demographics,  firms will have to concentrate efforts on the growth and development of rookie advisers.    

“A well-structured training program should gradually shift rookie advisers into production and provide a natural progression of their roles and responsibilities, so that practices can capitalize on a new resource without boxing a rookie into an operational or support role,” said Caruso. “RIA custodians and B/D home offices should actively support this transition process by providing best practices and a framework advisers can use to train future successors.”  

The Financial Industry Regulatory Authority, the self-regulating body, has been putting programs in place to bring a broader base of people into the industry and make it a long-term career, says Philip Shaikun, vice president and associate general counsel at FINRA. 

“We are working to make the industry more accessible to more people at an earlier stage,” Shaikun says. “We want to have a healthy, diverse industry where all perspectives are represented.” 

Shaikun notes initiatives such as making FINRA’s Securities Industries Essentials Exam accessible and available to students of all backgrounds, as well as making a path for individuals who temporarily leave the industry to rejoin without taking an exam, provided they complete annual continuing education.  

The majority of new-adviser recruiting is through word-of-mouth referrals, with 64% of them recruited this way. However, Cerulli said this informal recruiting process makes it more challenging for firms to reach wide range of applicants.  

“Broker-dealers and registered investment advisers must find new avenues for connecting with potential candidates and spreading awareness about the profession,” said Caruso.