We had about 327,600 financial advisors in the U.S. this time last year, according to the U.S. Bureau of Labor Statistics. When 2024 comes to an end next month, only about 306,290 of those financial advisors are expected to remain in the industry. You may have heard this decline attributed to the retirement cliff—a term coined to illustrate the record number of financial advisors projected to retire every year for the next decade.
And while I’m glad to see the retirement cliff getting the attention it warrants, I hope we’ll all be honest with ourselves about the fact that the real problem isn’t new. There is a hidden, slippery slope that’s been around a long time and is just as problematic: low advisor retention. Low retention means we’ve failed to provide fitting career opportunities and career preparation within the profession, resulting in talented individuals walking straight out the revolving door.
Why Is Low Retention a Problem?
At best, low retention signifies a failure of expectation-setting. At worst, it’s a failure to help financial services professionals succeed and thrive. Furthermore, the fact that we haven’t solved this problem sends the sad (and untrue) message that we don’t care. I believe retention is the No. 1 problem we must solve as a profession. And we have a responsibility to solve it before we attract an influx of new talent.
The invisible threat of low advisor retention claims nearly as many careers as retirement, if not more, but with more detrimental effects to the financial services profession. When a financial advisor retires, they leave a legacy filled with fond memories of their life’s work. Often, their stories and their successes inspire future generations to consider careers in financial services. But when someone who has trained to be a financial advisor leaves the profession to change careers, they leave unrealized dreams, unfulfilled potential and perhaps cautionary tales. How much outstanding talent has walked away and left a void where a great career could have been?
How Big of a Problem Is It?
If we were to look at advisor retention over the past 10 years, long before we started talking about the retirement cliff, we would see turnover numbers so staggering they could knock us off our feet. According to Cerulli, nearly three-quarters (72%) of advisor trainees drop out before becoming licensed, credentialed advisors. They’re barely past onboarding before they call it quits. This means we’re spending significant time and money to train and educate professionals who are ultimately transferring the skills they learned from financial services to join other professions. We’re making a difference in their careers, but other professions are the beneficiaries of our investment.
Over the coming decade, The American College of Financial Services estimates 10,000+ advisors per year will leave the profession for reasons other than retirement—that’s nearly as many advisors as are estimated to retire in the same time frame.
Meanwhile, despite the dual challenges of retention and retirement, the U.S. Bureau of Labor Statistics projects the number of financial advisors must grow 13% over the next decade to meet demand. After all, the record number of baby boomers who are retiring will need help from professionals! I call this “the climb”—the positive, upward trend we’ll see as we grow the profession over the next decade. It’s a huge opportunity to fix our retention problem. If we keep over-hiring to compensate for high turnover while also trying to grow the profession, the math won’t work for employers. And if we perpetuate the structure and retention issues we have today, the experience won’t work for the next generation of advisors. There is a better way.
What Does Representation Have to do With It?
At The College, we envision financial services will grow through representation, or what is often called inclusion. That is, the more we include individuals from various backgrounds, the stronger and more future-ready our profession will become. As demographic trends are shifting to a more diverse population—with a greater percentage of college graduates who are women, plus an overall population that includes more individuals who are Hispanic or Latino, Black or African American, Asian or Pacific Islander, or any other makeup—we have a great opportunity to welcome newcomers.
So my views of representation are not misinterpreted, I’ll share the question I get frequently: Am I suggesting we need financial services to mirror the U.S. population demographics for the purpose of making the profession exactly representative of the nation overall? No. Not only is that not necessary, it’s not practical. Inclusion means all are welcome, but whether all want to join the profession is not entirely within our control.
For a more productive focus, I’m suggesting we take this moment as a long-overdue opportunity to fix what is broken today with respect to employee retention. As I shared on the main stage at a recent conference (to gasps in the audience, I might add), the profession has failed white men.
According to the Census Bureau, as of 2021, 69% of all personal financial advisors were male, and 80% of all personal financial advisors were white. That’s why I say we’ve failed white men: they represent the largest demographic segment in our industry today, meaning white men are both the ones leaving the industry and the ones left behind when others leave. If we can fix the retention issue, not only would we bring in more newcomers of diverse backgrounds, but we would also end up supporting over a quarter-million current advisors, many of whom are white men, who are “toughing out” today’s challenges.
How Can We Solve the Retention Problem?
I believe the root causes of our retention problem are alignment and advancement. First let’s consider alignment to the realities of the profession, some of which are quite stark. If the hiring process doesn’t include a realistic job preview, then we must do a better job providing that insight before a candidate sits for an interview.
Too often, new recruits are a few months into the role when it hits them: “I didn’t sign up for this!” Better communication and alignment upfront—about the roles available, their compensation models and what success looks like the different pros, cons and tradeoffs of each, and the options to create a personalized career path—may keep newcomers in the profession. Through better alignment, newcomers may find a better fit from the start, or if it becomes clear there’s a mismatch between where they started and where they really want to be, they’ll have more awareness and confidence in their options (other than leaving altogether).
Next, let’s think about how we advance newcomers forward in their careers. Paired with better alignment upfront, more intentional advancement opportunities keep newcomers engaged and growing in the profession. Some of The College’s institutional partners do a remarkable job of this and have programs in place to make sure advancement is consistently embedded in the employee experience. Advancement opportunities may include establishing formal mentoring relationships, leadership development programs, career development events and internal job fairs.
At The College, we know one of the best things an employer can do to support a professional’s advancement is to offer access to applied knowledge, including insight on how to prepare for the profession as well as formal designation and certification programs. You may have seen our tagline, “Expand Your Opportunities,” which is what our educational programs, conferences, and research are designed to help advisors do.
What Role Does Professional Education Play?
Applied financial knowledge is a proven career game-changer. The 2024 Designation Outcomes Study conducted by FUSE Research Network shows financial advisors with professional designations from The College reap benefits that are both quantitatively and qualitatively measurable.
Quantitatively, College designees report higher growth in production, earnings, number of clients and client retention over the past three years compared to advisors with no designations. Qualitatively, College designees also say their business practices have improved since earning their designation in terms of better client conversations, a greater ability to help clients with more goals, higher client satisfaction and improved client referral rates.
While the full study has not yet been released, consider the impact designations have on earnings as one example—and a key indicator of an advisor’s professional success and satisfaction. Financial advisors who hold the Chartered Financial Consultant designation report 32% higher growth in earnings over the past three years than advisors with no designations. On top of that, advisors who hold the ChFC designation and then add the Retirement Income Certified Professional designation see an additional 20% growth in earnings. This additive effect illustrates the value of multiple designations, and especially the power of coupling foundational competency plus specialized knowledge. Moreover, we also see the impact of timing: client-facing advisors who complete designation programs within the first four years of their tenure report 2.3x higher earnings than those with no designations.
The main takeaway from the research is that advisors with College designations are more productive; they and their employers experience a real return on their investment in education—both immediately and over the long term. As more of the 2024 Designation Outcomes Study findings are released over the coming months, we expect to see a clearer picture of the overall impact applied knowledge can make on an individual’s career and their business growth trajectory.
What’s Next?
At The American College of Financial Services, we are raising our hands to help fix the retention problem. We propose the following solutions:
- Recruit new entrants — In addition to the traditional channels, financial services firms must seek out candidates from non-traditional undergraduate programs (beyond finance and economics) and from colleges and universities that have not been part of the feeder system of the past. Employers may have to “over-hire” until retention improves.
- Provide options — As an industry, we can do better at making job candidates aware of the breadth of roles available, compensation structures, industry trends and possible career paths. By offering this insight, we will attract new entrants who are more likely to stay.
- Support advisor education early and often — Throughout their careers, advisors benefit from an education that prepares them for the realities of the profession and builds both foundational competency and specialized, applied knowledge. The research indicates advisors should not wait to invest in education nor stop after one designation if they have the means and motivation to strive for more.
I would encourage any advisors or firm representatives who are interested in supporting The College’s efforts in this area to please visit us online, on social media or reach out to our team directly.
Let’s not see another year go by without improving advisor retention—both for those who will join our ranks over the next 12 months and for those who are already here. The financial services profession and society will be better for it.
George Nichols III, CAP, President and CEO, The American College of Financial Services
