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Advisor shortage? What advisor shortage?

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Excuse me, did Todd Thomson just say there too many financial advisors, not too few?

Puncturing one of the RIA industry’s most widely-accepted axioms, the Dynasty Financial Partners chairman did indeed make that assertion at the recent MarketCounsel Summit in Las Vegas. Contrary to ominous reports of a talent shortage, Thomson said, too many advisors are serving too few clients.

Conventional wisdom has held that as advisors get older and retire, too few younger people are taking their place, leaving the industry with a dearth of talent.

But Thomson pointed to a report by Cerulli Associates showing that 72% of the over 18,000 independent advisory firms (many of them solo practices) have assets under management under $100 million. However, the combined assets of those advisors only account for 7% of total industry assets.

Meanwhile, according to Cerulli, 60% of RIA assets are held by firms with over $1 billion in AUM, yet those assets are serviced by less than 4% of advisors. What’s more, 73% of all RIA assets are held by advisory firms with between $500 million and over $1 billion in assets.

“All [those] firms have to do is increase the assets they manage by less than 10% and you literally wouldn’t need any of the [smaller] firms,” Thomson said in a subsequent interview with Financial Planning.

Thomson made clear that he didn’t think solo practices would or should go out of business. “I’m not suggesting that there won’t be an ongoing role for smaller firms,” he said.

"We have way more firms than we need," says Dynasty Chairman Todd Thomson.

But Thomson did point out that as larger firms continue to grow and leverage professional management, scale and technology — not to speak of the coming artificial intelligence revolution — they will be able to absorb more and more clients.

“There’s plenty of capacity in the industry to absorb that migration,” the Dynasty executive maintained.

As a result, “we certainly don’t have a crisis of not enough talent,” said Thomson, who was CEO of Citigroup’s Global Wealth management division before co-founding Dynasty 10 years ago. “Instead, we have way more firms than we need.”

To be sure, Thomson’s comments should be taken with a grain of salt. After all, it’s in Dynasty’s self-interest to boost large firms who are the platform provider’s clients.

Nonetheless, the facts Thomson cites are real, forcing the industry to re-examine a heretofore unchallenged shibboleth: Are there really too few advisors? Or too many?

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