The wealth management industry needs as many as 25,000 new financial advisors in the next three years just to replace those retiring or leaving the field, Cetera Financial Group CEO Robert Moore says.
“None of us are doing near enough to address that issue,” Moore said during a panel discussion at last month’s FSI OneVoice conference. The view set him apart from the other panelists, Commonwealth Financial Network managing principal John Rooney and Kestra Financial CEO James Poer.
Rooney and Poer agreed that the industry needs to become more diverse. However, they said the number of advisors is more likely to fall in coming years amid consolidation from M&A deals, downward pressure on fees and increased regulatory pressures.
Moore had argued that independent broker-dealers have hiring gaps, which could be addressed while boosting diversity through college and veteran programs. “We have to come up with a much better way of thinking through how we attract that talent and fund that talent in its initial stages when it’s not generating revenue,” he added.
Cetera bulked up its training programs for new advisors last year at Cetera Financial Institutions and Cetera Financial Specialists. The network also hired 150 to 200 new entrants to the field among those two firms and Cetera Advisor Networks, its largest IBD.
Cetera’s total recruiting haul last year across its six firms amounted to 784 advisors, including 194 brokers from National Planning Holdings’ four IBDs, according to Moore. Revenue rose almost 7% year-over-year, and profits jumped more than 60% in its first full year after emerging from bankruptcy.
Moore sees the training programs for Cetera’s bank and tax channels as helping both the El Segundo, California-based firm and the industry. IBDs can no longer rely on the wirehouses to introduce new advisors through their training programs, Moore says.
Prospective mid-career advisors have “been in the military or they’ve been doing something else, and this is a very compelling opportunity for them to look at a very rewarding field ,” he says. “We love the idea of creating advisors who are independent from the very beginning or inception of their tenure in the profession."
Most of Cetera’s new recruits did come from other firms in 2017, though. For example, Cetera Financial Institutions grabbed Short Hills, New Jersey-based Investors Bank, which has 22 advisors and $700 million in assets under administration, from Invest Financial in December.
The program had been slated to transfer to LPL Financial after the No. 1 IBD acquired the assets of Invest’s parent, NPH, in August. LPL now estimates that around 1,200 of the 3,200 advisors across NPH’s four IBDs will end up elsewhere following the massive purchase.
A spokesman for LPL declined to comment.
For Cetera’s part, spokesman Joseph Kuo declined to say how many advisors Cetera added on a net basis for the year, noting the firm doesn’t disclose the number. He did say in an email that the firm had a 95% retention rate and its first positive net new advisors and revenue in three years.
Cetera’s nearly 800 new advisors brought $15 billion in client assets, according to Moore. The firm, which is the largest of any of the IBD networks by revenue, now includes 7,772 producing advisors across its six IBDs, including First Allied Securities, Cetera Advisors and Summit Brokerage Services.
A seventh, Girard Securities, merged into Cetera Advisor Networks in November. Cetera Financial Specialists, its tax channel, and Cetera Financial Institutions, the bank and credit union channel, previously had training programs, but Cetera introduced advisory training into them last year.
In the panel, Moore told the audience his four kids, who are college-aged or older, see financial services as “basically heresy on a number of different levels.” The panelists lamented that IBDs suffer from out-of-date reputation as the province of stock brokers competing for sales rather than planners.
Any possible solutions for the next generation would work on too small of a scale to address the personnel issue, Moore said. Poer and Rooney differed with him on the urgency of the matter, arguing exits by lower producers would create enough openings for the next generation.
“We don’t necessarily need three $200,000 producers, we need one $600,000 producer with staff,” Rooney said. “I think what you’re seeing now is practices evolving to where there’s a certain number of rainmakers, and they’re hiring people in as planning associates or services associates.”
Poer hasn’t fully made up his mind about the issue, he said, but he’s leaning closer to Rooney’s view.
“There are so many significantly low producers in our industry,” he said. “So many of them view it as a lifestyle business that I don’t know if we truly have a problem or not.”
Moore responded that the hiring need comes from the “massively underserved” portion of the population currently not using planning services.
“I think it is at a crisis point,” Moore said. “The reason I say that is because we’re really not accepting the fact that competent people who want and need advice aren’t getting it.”