How to find, hire, train, and retain financial professionals
Financial professionals overseeing trillions of dollars in client assets are expected to retire in less than five years, according to the industry research firm Cerulli Associates. That means the profession is now rife with opportunity for young people looking to join it. In fact, just last year, more than 18,000 new recruits signed on to become financial professionals.
During that same time period, however, Cerulli reports, more than 13,000 rookies—defined as those with three or fewer years in the role—dropped out of the profession.
As a result, factoring in retirements, the industry netted only an estimated 2,579 new professionals in 2022, out of a nationwide pool of about 300,000. If the trend continues, the number of financial professionals may start shrinking by 2026, as the rate of retirements accelerates.
“There’s no doubt the profession is facing a succession crisis,” says Stephen Caruso, research analyst on the wealth management team at Cerulli. “The industry really needs to be thinking about how we develop sustainable pipelines to bring folks in.”
A shortage of producers poses a challenge to the profession’s long-term mission of helping people reach their financial goals, such as paying for college and preparing for a secure retirement. But even in the short term, it represents a missed opportunity for established financial professionals to grow their practice.
Time slips away
According to the 2023 U.S. Financial Advisor Satisfaction Study by J.D. Power, 28% of financial professionals say they don’t have enough time to spend with their clients. That not only leads to client dissatisfaction but also producer dissatisfaction, says Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power.
“An advisor who feels like they already don’t have enough time with their current clients certainly is less likely to go out and develop new ones, and they’re also more likely to leave for another firm,” says Martin. “It’s a good reason to consider developing junior staff to support the overall growth of a firm.”
"Part of the challenge in recruiting new producers is that many people have outdated ideas about what it means to be a financial planner, assuming it involves a lot of salesmanship."
Established financial professionals who aren’t hiring and developing new talent are also missing out on the potentially lucrative opportunity to transfer their client base to someone younger when they retire. Given that the average age of a financial professional today is 56 years old, according to J.D. Power, financial professionals should be giving more thought to recruiting new financial professionals they can train to take over their current clients—a process that generally takes at least five years.
Firms should still be careful about whom they hire, however, because turnover is not only common—Cerulli estimates that about 72% of rookies leave the industry in their first three years—it’s costly. There’s the loss of the investment of time and money it takes to onboard a new employee, but also it can harm your relationship with current clients if they notice the lack of continuity among your staff.
“When you lose someone, you’re really back to square one—or worse,” says Caruso.
So what’s the key to averting the succession crisis? First, it’s finding people who are a good fit for the profession through smart recruitment and hiring strategies. Then, once they are hired, it’s putting the right programs in place to keep those new recruits motivated.
Attracting and hiring the right applicants
The number of universities offering four-year degrees in financial planning has soared in recent years. Today, the Certified Financial Planning Board lists 176 bachelor’s degree programs that meet its educational requirements, compared to just 127 in 2014.
However, those programs still aren’t churning out enough new recruits to fill the industry need for new financial professionals, especially at smaller firms that might find it hard to compete with nationally known firms when they recruit at big universities.
Caleb Brown, who is a certified financial planner as well as the co-founder of New Planner Recruiting, says recruiters need to think broadly about finding candidates. People with experience at other professional service firms, such as law and accounting firms, can be a great fit for financial planning. Mortgage brokers—who’ve seen their ranks thinned by rising interest rates—are also good candidates. Even former teachers can be excellent recruits, Brown says.
"People come out of school and they’re in a rush to get started...”
Part of the challenge in recruiting new producers is that many people have outdated ideas about what it means to be a financial planner, assuming it involves a lot of salesmanship.
“There are people out there who would be great advisors who don’t know it, because they have in their head an old stereotype,” says Brown, an adjunct faculty member at the University of Georgia’s Financial Planning Program. “They don’t realize that today’s advisors take a more holistic approach in helping their clients achieve their goals.”
Brown cautions against making the screening process for applicants too onerous, but says it’s important to ask enough questions to find out if their values are consistent with your firm’s. Having applicants write a paragraph on how they may approach a hypothetical client’s issue is a good way to determine if they have the necessary communication and analytical skills to be a producer.
Keeping new hires happy
Cerulli’s estimated 72% dropout rate for new financial planners indicates that the producer shortage may be as much of a retention issue as a recruitment one.
Blake Pinyan, a 2019 graduate of San Diego State University’s financial services program, says he thinks many new financial professionals quit because they don’t focus enough on finding a job that’s the right fit for them. A person who could be a great registered investment advisor may not enjoy life as a broker-dealer representative, for example.
“People come out of school and they’re in a rush to get started,” says Pinyan, a financial planner at Anchor Bay Capital in Orange County, California, as well as the chair-elect of the Financial Planning Association’s NexGen Committee. “Maybe they have student loan debt to pay off. So they just take the highest paying, most prestigious job they are offered.”
Cerulli’s research also indicates that well-structured training programs with clear goals and timelines for advancement are important to rookies. Caruso says it’s common for new financial professionals to feel stuck in operational and support roles after a few years, and they don’t see a clear path to shifting into production. That can be especially discouraging to them, he says, as 69% report that they are responsible for building their own client base from scratch.
Cerulli’s data also shows a disconnect between what rookie producers want from their firm and what practice management professionals prioritize giving them. For example, only 14% of practice management professionals saw training in investment analysis as “very important,” while 44% of rookie producers did. Rookies also saw training in financial planning topics and support for obtaining licenses and designations as significantly more important than their bosses did.
A clear path to acquiring equity in a firm is also attractive to rookies, says Caruso.
“Everyone wants to be compensated fairly in the form of salary, but they also want to know that if they work hard and meet certain goals, there’s the opportunity for an ownership stake as well,” adds Brown. “If they have that entrepreneurial drive that you want, that will be important to them.”
A commitment to growth
Firm investment in technology has become increasingly important to producer satisfaction, according to the J.D. Power survey, especially since the pandemic had so many people working remotely. Martin says firms don’t have to constantly be buying into the latest fads in financial tech, but they do need to be periodically looking at the tech resources they offer and considering if they are still working well for their producers.
"You can do everything right, and you’re still going to have turnover.”
“You don’t always need to have the latest-and-greatest shiny object out there,” says Martin. “But you need to be regularly assessing what you have against what’s available.
“More than anything, that’s a signal to newer financial professionals that you are committed to growth, that you are committed for the long run. If they see that, they are more likely to stick with you.”
Pinyan also urges employers to consider other pandemic workplace holdovers, such as the flexibility to work from home at least part of the time. He says unlimited PTO is also popular among younger employees, and studies have shown that people with unlimited PTO often ended up taking less time off than those with the traditional defined vacation allotment.
“Flexibility is really important,” says Pinyan. “New planners are looking for a friendly, welcoming, supportive team environment where they have a chance to learn and grow.”
Brown also urges practice managers to consider the specific mindset of the next generation of financial planners when judging the success of their hiring and retention efforts.
“You can do everything right, and you’re still going to have turnover,” says Brown. “This generation is just not planning to stick with the same company that hired them right out of college for their entire career. If you get somebody to stay for five years, that’s great.”