In a recent release, Cerulli Associates again reinforced the dwindling number of advisers in the U.S., estimating that the number of advisers practicing in the U.S. dropped from more than 301,000 in 2004 to just over 298,000 in 2007. Yet the independent adviser channel continues to blossom while adviser numbers drop overall.

Despite the likely industry boom as Baby Boomers retire, the financial advice industry is shrinking in most channels—the exception being the bank and registered investment adviser (RIA) channels, which both saw about a 2% increase. In some ways, the overall drop in advisers could be advantageous, Cerulli says, because it means some broker/dealers found their least productive advisers were their greatest compliance risks.

However, Cerulli says the larger issue is that the industry is not attracting new advisers. In a report earlier this year, Cerulli notes that same trend, and pointed out the current adviser lineup is graying rapidly (see B/Ds Dealing With Dwindling Numbers of Advisers).

Cerulli calls for more strategic hiring methods, particularly to bring in the next generation of advisers, who prefer more independent channels (see Firms Increase Recruiting Efforts for New Advisers and Recruiting Advisers Requires Less Traditional Approach). A recent survey by Schwab of students at Texas Tech University’s Division of Personal Financial Planning reinforces Cerulli’s results, finding that advisers preparing to enter the field envision themselves at smaller, more specialized firms (see Smaller is Better, Says Next Generation of Advisers).

In light of this knowledge, it might come as no surprise then that the Cerulli survey, conducted in conjunction with Advanced Sales Corporation, found that the RIA channel is experiencing a small growth spurt. Both banks and RIA channels had growth rates of just more than 2%. Dually registered advisers experienced the largest growth, with an annualized growth rate of a whopping 22% in the past three years.

Increasing Wholesalers

Although adviser ranks are decreasing, the number of wholesalers calling on advisers is expected to increase. Cerulli says the results indicated that product manufactures have a plan to increase wholesaling staffs, making wholesaler retention and recruitment challenging for manufactures.

Wholesalers are increasingly expected to play a more consultative role with their advisers, Cerulli says. “There are significant mismatches in the experience and education of advisers and wholesalers,’ said Bing Waldert, associate director of Intermediary Research at Cerulli Associates, in the release. He notes an experience different between the two, as most advisers have 10 years or more of experience, and only about a quarter of wholesalers have been selling externally for that long.