More Advisory Firms Are Looking To Hire
Graduates For Client-Facing Roles, Yet Many Still Lack Solid
Succession Plans
The financial advisory industry is getting younger as more firms
hire recent college graduates to fill client-facing and
revenue-generating roles, according to the 2017 FA Insight Study
of Advisory Firms: People & Pay, an industry
benchmarking report from TD Ameritrade Institutional.1
The latest People and Pay found that 31 percent of firms are
targeting recent college graduates for revenue-generating roles.
The median age of lead advisors has slipped by three years to 47
since 2015. And while many graduates emerge licensed and
credentialed, they are less productive than experienced investment
advisors with an existing client base.
“Advisors are reinvesting in their future, opening their doors
to the next generation and pursuing a range of strategies to
attract and develop human capital,” said Vanessa Oligino, director
of business performance solutions at TD Ameritrade Institutional.
“The challenge for firms is to communicate the benefits they can
offer, promote the growth prospects of a financial planning career
and structure an organization that can help these new advisors
develop and contribute to long-term growth.”
Advisory firms are optimistic about growth and “help wanted”
signs are plentiful. The median firm expects to have seven
full-time-equivalent employees by the end of 2017, up from five
just two years ago. And while advisors said the pace of client
growth slipped to 6.4 percent in 2016, that growth rate is still
slightly above-average for the nine-year history of the study.2
The industry overall remains healthy with firms reporting a
median of 13 percent growth in assets and 6.7 percent revenue
growth. Encouragingly, advisors project stronger client growth in
2017.
Casting a Wider Net
That said, good help may be getting harder to find. Industry
research3 has shown that a wave of baby boomer retirements would
likely outpace the expected arrival of young advisors, resulting in
a shortfall. The FA Insight study suggests that this talent gap may
now be making its presence felt, the study shows.
More than two-thirds of firms reported that hiring
revenue-generating roles – lead advisors, associate advisors and
business developers – is becoming increasingly challenging. As a
result of this scarcity, more firms are outsourcing, forming
strategic partner relationships and casting a wider net for
talent.
Indeed, six out of 10 firms have realized labor savings as a
result of some form of outsourcing. In addition to outsourcing
compliance and back-office functions, many firms are using third
parties to offer additional services, such as tax preparation and
insurance, even if they advertise these services as client
offerings.
The study also found that firms are incorporating a range of
benefits and non-cash compensation, such as flexible work
schedules. Firms also offer professional development, remote work
options and leaves of absence. A key offering for younger advisors
is a clear career path and the availability of mentoring.
Despite the high demand for talent, median lead adviser pay
declined at an annual rate of 7 percent to $168,500 over the past
two years. Median pay for support advisors, though, rose by an
annual rate of 6.2 percent since 2015.2 Both trends reflect the
increased hiring of younger, less-experienced advisors.
What’s the Plan?
Long-term organizational planning, the study shows, is what
separates the standouts from the rest of the herd. Just 19 percent
of advisors have a documented plan for the future firm they want to
build, proactively thinking about hires and positions that can
handle growth, before those employees are needed. Too often, firms
scramble to make hires only after expansion creates service and
operational challenges.
One thing that hasn’t changed in two years: an absence of formal
succession plans, the need for which only grows more critical as
the ranks of advisers nearing retirement swell. The share of firms
with an owner three years or less away from retirement increased
from 7 percent in 2015 to 12 percent in 2017. According to the
latest study, only 37 percent of advisory firms said they have a
viable plan. The rest either don’t have a plan or have plans with
serious flaws, such as the lack of deal-financing details or no
named successor.
Most firms favor home-grown successors. Nearly one in five firms
brought on a new primary owner in the past two years, though
arguably this is not a fast-enough pace to alleviate the growing
need.
“Choosing a successor can be very difficult,” said Oligino. “In
many cases, advisors are worried about taking care of clients
they’ve had for decades, and of their staff, some of whom are like
family. Founders want to be absolutely sure they’re leaving their
business in good hands and so they’re reluctant to pull the
trigger.”
To Learn More
To learn more about People and Pay, download the executive
summary here. TD Ameritrade Institutional clients can purchase the
full study at a discount by visiting our online Education Center.
Other advisors can visit fainsight.com or call TD Ameritrade
Institutional at (800) 934-6124.
The 2017 FA Insight Study of Advisory Firms: People & Pay
draws from data received from 388 financial advisory firms that
responded to an online survey fielded between Feb. 2 and March 30,
and that met our standards, which include a minimum $150,000 in
annual revenue and being in business for at least 12 months.
Responses were screened for data accuracy utilizing automated and
manual review methods. Where discrepancies were found, follow-ups
were conducted with firms to clarify their information.
FA Insight is a product of TD Ameritrade Institutional, division
of TD Ameritrade Inc. FA Insight is a trademark owned by TD
Ameritrade IP Company, Inc. TD Ameritrade Institutional, division
of TD Ameritrade, Inc., FINRA/SIPC.
TD Ameritrade is a trademark jointly owned by TD Ameritrade IP
Company, Inc. and The Toronto-Dominion Bank. © 2017 TD
Ameritrade
About TD Ameritrade InstitutionalTD Ameritrade
Institutional is a leading provider of comprehensive brokerage and
custody services to more than 5,000 fee-based, independent RIAs and
their clients. Our advanced technology platform, coupled with
personal support from our dedicated service teams, allows
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effectively while optimizing time with clients. TD Ameritrade
Institutional is a division of TD Ameritrade, Inc., a brokerage
subsidiary of TD Ameritrade Holding Corporation.
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1 TD Ameritrade Institutional is a division of TD Ameritrade,
Inc., a brokerage subsidiary of TD Ameritrade Holding Corporation2
The 2017 FA Insight Study of Advisory Firms: People & Pay3
Cerulli Associates, Advisor Metrics 2016
Source: TD Ameritrade Holding Corporation
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version on businesswire.com: http://www.businesswire.com/news/home/20170809005090/en/
TD Ameritrade Holding CorporationJoseph A. Giannone,
201-369-8705Communications &
Advocacyjoseph.giannone@tdameritrade.com
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