Why the kids don’t want to be financial advisors
Job hunting? The financial advisor industry needs fresh blood, but it isn't likely to find any.
FA Magazine has the results of a study by Cerulli Associates which basically tells you that the advice business has hit a wall and is not replenishing the ranks with young talent. I'll post the stats and then explain why this is the case:
As an industry, the financial advisory business is relatively young. But its practitioners aren’t. Cerulli Associates recently threw out some numbers to chew on––the average age of financial advisors is a shade under 49 years, and about 14% of its workforce are north of 60 years. More important, less than 25% of all advisors are ages 40 and younger. And one final number to consider: Just 5.6% of advisors are ages 30 or younger.
The industry needs new blood to replenish itself at a time when aging baby boomer clients will be putting greater demands on their advisors (many of whom themselves will be shifting into retirement mode). But an influx of reinforcements doesn’t seem to be happening.
OK, now some truth about why the young 'uns either don't want to or cannot become financial advisors in this era:
The business has become a concentration camp.
Here's the deal...
Most of us got into the game because we loved two things, the markets and helping people. And then, in contrast to the investment banking and trading side, the financial advisory business became the most stifling and soul-crushing segment of Wall Street. Creativity of any sort became discouraged and any attempt at innovation has been roundly thumped with the paperwork-and-filing cudgel. "Keep your head down and just buy mutual funds, anything too far off of the beaten path will look suspicious."
A single transgression has the ability to effectively end one's career and turn him or her into an instant pariah, regardless of the specifics of the case. Accusation against a financial advisor or broker is as good as fact and is recorded in stone for all to see even before there is a hearing. This amid an environment where petrified firms would rather pay the fine than fight, regardless of the rep's side of the story. Industry participants live in constant fear of become regulatory "trophies" if, heaven forbid, every single "i" isn't dotted in exactly the right way come audit time. And "intent" is zero tenths of the law, even the well-meaning but erring professional is subject to summary execution.
And lest you think this is just a whiny call for less regulation, feel free to peruse my archives, I have spilled more digital ink in favor of consumer protections than almost anyone in the financial blogosphere. Trust me, it's all here. There are bad guys in every industry and financial advisory may actually attract more than most, so regulation is important. If only this regulation was more capable of distinguishing between the evil and the merely misguided. If we must err to one side, however, then protecting the clients must come first. Now you can see how it is that we've arrived here.
Even now, there is legislation afoot to subject all brokers to the Fiduciary Standard that financial advisors are currently subject to. This is fine, but wouldn't a unification of the two careers make more sense then? 8 out of 10 people you know have no idea that there is a major difference between brokers and advisors and that only some people are licensed to be both. Shouldn't we educate while we legislate?
In short, I love my industry and I'm proud of the efforts of my colleagues across the country in serving their clients. When advisors do the right thing by their customers and help them achieve their goals, there is a tremendous feeling of positivity and gratification. Unfortunately, this side of the business is rarely seen in the media.
As a result, the kids don't want to learn this trade when there are sexier, freer lines of business on The Street. They won't work behind 10 foot granite walls and barbed wire, in a profession where a Christmas card to a client needs two signatures on it before it can be mailed. They will not willingly come from college into a career in which they are treated as not worthy of the use of social media or unsupervised emailing.
My proof of this? Financial services firms are suspending training programs and are instead paying experienced advisors 250% of their trailing-twelve gross production. If youthful talent had any interest in coming in and being trained to do this, the veterans wouldn't be nearly as in-demand.
There are a record number of 20-somethings collecting unemployment from coast-to-coast and they are not banging down the doors of the FA industry. Now you know why.
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