Salient to Investors:

Cerulli Associates says:

  • The total head count of advisors fell 4,000 in 2011, and will fall to 297,515 by the end of 2016, from 316,109 at the end of 2011. Independent broker-dealers and the wirehouses will see the biggest decline – 18,000 by the end of 2016.
  • The aging of the industry is not being offset by the influx of new talent – wirehouse training is not enough to make up for the number of advisers retiring and leaving the industry.
  • The average age of an adviser was 51 1/2 in 2012, and advisers typically plan to retire at 68 – 8,600 advisers will reach this retirement age each year over the next 13 years.

RIAs will grow by 4.7% annually over the next 5 years to more than 36,000, and dually registered advisers will increase 5.3% to nearly 24,000 by the end of 2016.

Mal Makin at Professional Planning Group said in the 1980s and 1990s, advisers came from insurance or brokerage firms and converted to financial planning, a move away from the sales-oriented culture, and the regulations and processes back then were a whole lot easier, and consumers much less sophisticated.

Danny Sarch says there are very few new advisers coming into the business, while the odds of the retiring adviser’s accounts staying with the firm are less than 20%.

Independent b-ds and RIAs don’t have the means or model for training new people, so depend on the wirehouses and insurance companies to do it.

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