New study reveals challenges for the banking industry as an ageing cohort of financial advisors makes recruitment and retention harder
People are becoming more aware of the potential of investments and prudent wealth management for their long-term financial security.
That’s good news for the financial services sector, especially banks who have an opportunity to turn customers who already have checking and savings accounts, mortgages, and insurance products, into wealth management clients too.
Despite the threat from robo-advisors, a significant cohort of clients favours human financial advisors (FAs), but there’s a problem.
The average age of FAs is rising and as they reach retirement banks, credit unions, and other financial services providers will find recruitment and retention harder to achieve.
A new report from Cerulli and industry association BISA highlights the issue for firms as they place greater importance on wealth management to generate diversified fee-based revenue and broaden client relationships beyond core banking services.
It shows that assets in the US bank broker/dealer channel has grown by a compound annual growth rate of almost 12% over the past five years, but the headcount of advisors has only risen 0.7% annually.
“Shifting market dynamics and competing advisory business models are putting significant pressure on banks’ and credit unions’ ability to attract and retain advisors,” says Chayce Horton, research analyst. “Banks need to be able to compete with other advisory channels, such as the registered investment advisor (RIA) channel, which has outpaced the broader wealth management industry in terms of AUM and advisor headcount growth.”
The whitepaper points to the risk from advisor attrition with bank advisors expecting to retire aged 64 and one third of advisors within 10 years of this not sure of succession plans.
Attracting next-gen, retaining experience
The challenge for the industry is therefore to attract the next generation of FAs and have stronger planning for ageing advisors.
“Establishing career-pathing options for advisors in the later stages of their career is crucial for banks, as it fosters greater satisfaction, retention, and long-term growth for both the advisor and firm,” said Horton.
The report also notes the cost of hiring and training young FAs which makes retaining them essential.
This will require a multi-pronged approach including ensuring that technology is good enough. According to the research, 52% of bank executives and advisors are dissatisfied with their firm’s technology, and this creates tension for the workforce and can often impact clients too.
“Banks and credit unions must act proactively to stay ahead in an increasingly competitive environment. By focusing on attracting and developing young and mid-level talent and retaining senior advisors, banks can better navigate the many challenges they face and remain competitive in the wealth management industry,” concludes Horton.
