Creating industry on-ramps as 100K advisors head toward the exit

Planner Dominique "Dom" Henderson applied skills he had learned in hedge fund operations to his first job in wealth management, where he helped a financial advisor switch firms.

"He was going to hire a firm to move his book of business. It was going to take like six months and he was going to pay a lot of money," Henderson, the founder of Dallas-based DJH Capital Management and the Jumpstart Coaching Lab, said in an interview. "Ninety days later, we moved his entire book from where it was into the new system. And then we did it again when he went to an independent RIA. So I was able to add, as a career changer kind of, a lot of value right off the bat."

That was 14 years ago, but for Henderson, the experience shows how aspiring financial advisors "add value to the table — but sometimes they don't know exactly where they add value." 

"If you invest a little bit in them, then they may return big dividends for you," he said. 

It's a lesson that the industry is learning slowly but surely, as more advisors and firms across wealth management try to solve looming succession quandaries by creating more pathways for young people and career changers to get into the profession.

Planner-led training and career tools like the BLX Internship Program and Amplified Planning's Externship, as well as companies such as Wealth Enhancement Group and Concurrent that are forming alternatives to the industry's traditional sales-focused approach, suggest wealth management is progressing toward solutions. Still, the sobering raw numbers show how far the industry has to go.

For example, as an organization connecting future planners who are Black or Hispanic to internships at registered investment advisory firms, BLX simply couldn't find enough participating companies to hire the nearly 150 qualified applicants it had for this upcoming summer, according to Luis Rosa, a co-founder of BLX and the founder of Las Vegas-based Build a Better Financial Future.

"We're excited but also kind of disappointed because there are so many people that we consider qualified who are eager to be in the industry," Rosa said in an interview. "It seems like our applicant pool keeps growing, and our firm involvement keeps shrinking."

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A business imperative

More than 109,000 advisors who represent 38% of the industry's ranks and manage 42% of its client assets will retire in the next 10 years. That adds up to "a headcount problem" for wealth management, research and consulting firm Cerulli Associates found in a study earlier this year. More than a quarter (26%) of those advisors expected to leave the profession have no succession plan, while 14% anticipate selling their advisory practices, and another 26% have chosen a successor, the report found. 

If those departing advisors do plan to sell their firms, they're going to want to find someone to be the next generation at their company, according to Brandon Kawal, principal of management consulting and transaction advisory firm Advisor Growth Strategies.

"Talent drives a lot of M&A — it's just a people business, so it drives a lot of M&A," Kawal said in an interview. "Now, it's not just a responsibility. There's a massive incentive built into it for owners, because it gives you more options and a better valuation."

Certain RIAs may not have heard that message loud enough, even as some of the largest firms in the industry seek to help nudge the potential successors into the field. For this summer, BLX received a record 292 applications, with close to half — 146 — fitting the organization's criteria to be deemed qualified for an internship, Rosa noted. Unfortunately, only 20 RIAs applied to BLX to hire a summer intern, and seven of them ultimately decided against selecting any of the applicants. Just 20 of the qualified aspiring planners found internships at 13 RIAs.

Fidelity Investments' eMoney Advisor stepped in to provide scholarships so that the other applicants could attend the Externship, an online career training program for the planning profession launched in 2020 by advisor Hannah Moore of Richardson, Texas-based Guiding Wealth. 

This summer's eight-week program in June and July drew nearly 600 people to its waiting list ahead of officially opening registration this week, Moore noted in an interview. Between 40 and 50 firms have started using the Externship as part of their internship programs, and it has drawn sponsorships from Charles Schwab and the CFP Board, in addition to striking partnerships with the XY Planning Network, the Financial Planning Association, Kaplan and a number of large technology vendors. Moore continually hears "firms saying that they can't find talent and new talent saying they can't find new jobs," she said.

"We help connect those dots for them," Moore said. "We want to be a welcome mat for entering into this profession and help people know that they're welcome here and help people find the right place to belong."

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A foot in the door

That often proves difficult for incoming potential advisors — even those like Dinon Hughes, who studied financial planning at Bentley University, which offers one of the plethora of undergraduate planning programs across the country. Hughes finally found his job as a financial consultant working toward becoming a certified financial planner with Portsmouth, New Hampshire-based Nvest Financial in 2022. Two prior internships with industry giants "left me feeling kind of jaded for the industry," he said. Friends from his undergraduate program who tried to enter the field through sales-driven paths have had similar disillusioning experiences and left the industry entirely, he noted. 

"Those experiences taught me that there are still a lot of financial advisor roles out there that don't truly do financial planning," Hughes said in an interview. "It's really tough for someone that's new to the industry — whether it's a student coming into the field or as a career changer — to understand those nuances."

Veteran planners like Henderson and wealth management executives have been calling on the industry for years to drop its infamous "eat-what-you-kill" sales demands on incoming advisors.

In order to forge more careers, the industry should focus less on "asset gathering, although I know it's profitable. I do it, too," Henderson said, and more on "creating a great financial plan that gives people the freedom and the opportunity to change their family tree." 

"Let's bring some of that innovation and consumer desire, wants and preferences into financial services, and let's stop just selling them, you know, 'If you don't have a half a million dollars or a million dollars to roll over, I don't want to talk to you,' because that's what a lot of the big brokerage houses do," he said. "And they de-emphasize the importance of creating a great financial plan as opposed to other things like product sales and AUM gathering."

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Hope for the future?

Some firms have begun changing to reflect the reality of the succession challenges, according to Julie Genjac, who coaches financial advisor teams in practice management as the vice president of applied insights for Hartford Funds. Five years ago, Genjac would field calls from advisors whispering to her that they were planning to retire because they didn't want anyone in their offices to hear them say "the R-word," she said in an interview.

"It was really interesting that it was almost this taboo word," Genjac said. "As an industry, we're building teams to prepare for the transition much more readily than we were several years ago. So that's great news. We're starting to think about, how do we transfer that trust, how do we engage the next generation of advisors proactively."

Plymouth, Minnesota-based Wealth Enhancement Group, an RIA aggregator, is building one such potential example for the industry under planner Kris Carroll, a managing director of the firm's Carolinas region. As an adjunct financial planning professor at Winthrop University who is a second-generation advisor in his own right and a frequent mentor to interns of his advisory practice, Carroll leads the RIA's training for novice and advancing advisors through Wealth Enhancement Group University. 

The program brings together eight to 10 of them for three-month study groups to help them "build those soft skills" in areas like emotional intelligence, leading teams of advisors and other professionals and managing client relationships, he noted. Many aspiring planners have already learned the key investment concepts and other so-called hard skills.

"What they don't yet have is the soft skills and the emotional maturity to manage any part of the business. They can have the technical skills so much faster," Carroll said. "To be honest, those soft skills aren't fast. Some people get them faster than others."

Tampa, Florida-based Concurrent is taking a similar approach, by identifying the "key strengths and how they can best contribute in the near term" for each new hire and providing "entry points across a variety of specializations," CEO Nate Lenz said in an email. 

"Our industry's talent shortage can be traced back to one root cause, a lack of patience," he said. "Horizontal team structures, where compensation is predicated on each advisor's individual book of business, places the emphasis on asset gathering prematurely. Developing both the competency and empathy needed to succeed takes nurturing and is learned best through a combination of formal training and apprenticeship."

As a program designed to foster that kind of long-term success, BLX is planning "to start working with firms a lot sooner in the process" in order to find more participating RIAs, according to Rosa. The fact that 20 planner hopefuls found internships this summer alleviates some of the disappointment from the smaller number of RIAs in the ranks, he said. 

"This is really, literally impacting people's lives," Rosa said. "That's what keeps us going."