Cultivating the next generation of wealth managers
The future of the wealth management industry in the US is clouded by upcoming retirements and a high attrition rate among new recruits. How are firms pivoting to attract and retain the next generation of advisors?
Younger generations in the US are seeking out financial advisors at an earlier age, according to Northwestern Mutual’s Planning and Progress Study 2024. The average Baby Boomer who uses a financial advisor began that relationship at the age of 49, but for Gen X it is 38 and for Millennials just 29 (see Figure 1).
Younger clients also want younger advisors. “If I’m in my late 20s and I’m looking for an advisory provider, my goal is to establish a relationship that can grow with me over time,” said Brie Williams, Global Head of Advisory Solutions and Wealth Intelligence at State Street Global Advisors. “I don’t want to feel the need to restart this process in another 10 years. This highlights how younger clients value alignment in life stages with their advisors, creating a dynamic of trust and longevity.”
The trouble is, the average financial advisor in the US is 56 years old and around 20% of them indicate they are less than five years away from retirement, according to a J.D. Power survey.
Moreover, many of these soon-to-be retirees lack a clear succession plan. Firms are also struggling to attract younger talent — and to retain it. Research by Cerulli Associates finds that over 70% of trainees leave the industry before becoming fully-fledged advisors.
To forestall a looming talent crunch, “as an industry, we need to first reframe what it means to be a financial advisor,” said Kristine McManus, Chief Advisor Growth Officer in the Practice Management department at Commonwealth Financial Network.
Highlighting the human side
In particular, the industry is working to address the perception that the job’s main requisites are a background in economics or mathematics, added McManus. Rather, “it’s a lot of problem solving and relationship building. There are a lot of people that would be great candidates — they just haven’t thought of the job in that way.”
Changing the perception of what providing financial advice entails and emphasizing its focus on personal connections, should help draw in more young people.
“I think it’s a perfect career for someone who really wants to make a difference in other people’s lives,” said Stacy Francis, CEO of Francis Financial. “When we talk about being a financial advisor, we often discuss working with numbers. But that’s only half of it. People want to spend their career making a difference in people’s lives, and that’s really the basis of the work we do.”
The industry is also moving to attract more talent by making clear that advisors can hail from a broad range of backgrounds. “A Commonwealth-affiliated advisor was a nurse for years before entering their firm,” said McManus. “But he didn’t want to let anybody know that because he felt that’s not what clients expect — that they’d rather have someone with an economics degree. But I explained to him that nurses are one of the most trusted professions — you’ve shown that you care for people. It may be a totally different career, but its core elements are incredibly relevant to the work at hand.”
Deprioritizing sales
Wealth management’s shift away from a sales-focused, “eat-what-you-kill” model is also making it more appealing to young talent, said McManus.
Williams echoed that view, noting that whereas new advisors once spent a large portion of their time making cold calls, over the years “the profession has evolved to focus on building relationships and delivering personalized, outcome-driven services. Today, it’s all about understanding and delivering on what clients truly value and are willing to pay for.”
Williams recalled a conversation with “an advisor who initially entered the industry right after school, but left feeling disenchanted with the heavy focus on selling, which he felt didn’t align with his personal goal of helping clients with their financial priorities.” He eventually returned, however, “after recognizing the industry’s shift toward planning-focused services. By prioritizing personalized strategies aligned with his clients’ needs, he’s built a thriving practice that addresses real-world challenges and supports his clients’ long-term financial goals,” explained Williams.
“With a sizable portion of advisors retiring within this decade, newer professionals have a unique opportunity to step in and build relationships with the next generation of clients. Gen X and Millennials, set to inherit significant wealth, are eager for financial guidance tailored to their values and goals, creating a pathway for advisors to foster long-term partnerships and growth,” said Williams.
Furthermore, as older clients enter the decumulation phase and transfer wealth to the next generation, firms must consider how to retain their assets by engaging new, younger clients in the growth phase. Williams stressed continuity is key, and an internal succession plan often provides a smoother transition for both staff and clients than a sale or merger of the business. According to the Cerulli survey, far more retiring advisors plan on internal succession than external sales (see Figure 2).
Planning ahead for an exit
“An internal succession plan requires at least five years to execute properly,” said Williams. “The first two years should focus on setting personal goals and identifying potential successors, while the remaining three years are dedicated to implementing the plan. This method helps prioritize client retention and support the recruitment of next-generation advisors.”
Williams also stressed that involving future successors in client relationships early is critical for a smooth transition. “It not only demonstrates why these individuals were chosen to carry on the client’s financial journey but also ensures the retiring advisor can confidently transition into a smaller role, knowing clients are comfortable with the process and the relationship is in capable hands.”
Another issue is that many older advisors may be reluctant to fully exit the industry, said McManus. “A lot of them love what they do and most I’ve spoken to say their clients are some of their best friends.”
“At Commonwealth we run succession prep workshops, and part of that conversation is determining what they want to do next. So the workshop could involve helping them figure out how they can still play a valuable role,” McManus added.
Fortunately, “one of the many benefits of this profession is the flexibility it allows,” said McManus. “You could have a succession plan for 75% of your clients and keep 25%, working a week a month.”
To prepare the eventual successors, it’s critical to include them in client relationships far in advance of an expected retirement, said Williams. “You have to show your clients why these individuals have been hand-selected to continue helping them with their financial journey. It’s an endorsement of faith and confidence, which will translate to the clients giving them a chance so you can comfortably move on to a smaller role.”
McManus explained that in a bid to bring on new talent — and pave the way for succession — firms have created stronger career paths for service advisors, whose job is to service the clients of senior advisors, who can sometimes have more clients than they can service personally. Service advisors might initially sit in on client meetings led by the senior advisor, before eventually handling the meetings themselves once they’ve gained sufficient experience.
“It used to be that if you were a service advisor you could make a good income, but unless you could buy into the firm or buy those clients, you were capped,” said McManus. “We’re seeing different paths to leadership within a firm now. In addition, some advisors have become chief operating officers or taken on other executive roles for their firm. They don’t necessarily drive sales, but firms appreciate their considerable value. We’re seeing firms appreciate their next-gen talent and trying to leverage it to best advantage within their firm.”
Williams observed that the industry has become more attractive to diverse talent by embracing flexible working models. Team-based approaches, for example, allow advisors to benefit from shared perspectives and scale. They also enhance services for clients while offering advisors more balance and control over their schedule.
“If you are a solo practitioner and the only one supporting your clients, stepping out for childcare or elder care can make it difficult to maintain your business,” Williams added. “But with a team construct, responsibilities can be shared, allowing advisors to step away for a time without disrupting client service or starting the business over again.”
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