The average age of financial advisors in the United States is 50, with 38% of advisors aged 55 or older. While there are valid reasons for this age distribution, such as advisors targeting the assets of older clients and clients valuing experienced advisors, the financial industry faces an impending talent gap.
According to McKinsey, the last few years saw significant attrition in the finance industry, and of those that left “finance and insurance, 65% of workers changed industries or did not return to the workforce.”
Institutions must prioritize nurturing and developing young talent as the financial advisor population ages to ensure continued success and relevance in a rapidly evolving landscape.
The Current State of the Financial Industry
Demographic shifts in the financial industry and waning interest in finance careers among younger professionals have created a need for new talent. According to a study from the CFA Institute, interest in finance as a career has waned among younger professionals, with only 13% of those surveyed choosing finance as an industry in which they would like to work. Many young professionals choose careers in more technology-driven, creative, or entrepreneurial industries, exacerbating the talent gap.
The rise of technology has further compounded the aging of the financial industry. Automation tools and new software have made it easier for investors to manage their own portfolios without relying on an advisor. Despite this increase in technology, financial advisors are still in high demand, however developing next-gen advisor talent still remains a low priority.
Furthermore, the industry’s sink-or-swim approach to professional development often leaves young professionals to fend for themselves.
The Importance of Developing Talent
Advisors are not prepared for the future of the industry. A 2018 Financial Planning Association (FPA) and Janus Henderson Investors study indicated that 73 percent of advisers lack a formal succession plan, despite 95 percent agreeing there is some level of risk with not having a succession plan.
Developing talent is crucial for a wealth management organization’s sustainability and growth. A strong talent pool enables organizations to respond to ever-changing market demands, leading to increased productivity, innovation, and employee satisfaction. Neglecting talent development can result in decreased employee engagement, lower productivity, higher turnover rates, and a negative impact on overall health of your organization.
How to Develop Talent in the Financial Industry
To secure the future of the financial industry, organizations must adopt a multifaceted approach to talent development:
- Actively recruit young talent through partnerships with executive search firms specializing in connecting organizations with promising professionals in the field.
- Utilize reverse mentoring, pairing emerging professionals with seasoned industry veterans to encourage the exchange of ideas, foster innovation, and cultivate strong working relationships.
- Offer comprehensive training and development programs to equip young professionals with the necessary skills and knowledge.
- Establish a growth-mindset culture within the organization, promoting continuous learning and improvement.
The financial industry faces increased competition, shifting consumer expectations, and a growing need for agility and innovation. By prioritizing talent attraction and development, companies can establish solid foundations for sustainable growth and success in an increasingly complex and competitive landscape. Partner with Avior Executive Search to locate, attract, and develop the exceptional talent your organization needs to excel.