The wealth management industry is facing a generational crisis, and the support younger advisors want to develop a successful practice looks very different from that of earlier generations, a new study emphasizes.
According to J.D. Power’s 2019 U.S. Financial Advisor Satisfaction Study, the average age of financial advisors is about 55, and nearly one in five are 65 or older. Advisors under the age of 40, however, account for only 11% of the financial advisor population. As these older advisors move into retirement, one of the most critical challenges facing the industry will be how firms continue to grow, with tomorrow’s leading firms likely to be those that effectively attract, develop and retain new advisor talent, the study emphasizes.
But to do that might require a change in strategy. This so-called first generation of financial advisor “digital natives” expects technology to play a more important role in supporting their practice development, but they are much less satisfied than older advisors with the technology support they currently get from their brokerage firm.
Help Wanted
Among some of the key findings are that mobile tools need work and many advisors still can’t take advantage of social media. The study shows that 26% of employee financial advisors under 40 either aren’t aware of or don’t use smartphone-friendly tools, and 49% don’t use tablet-friendly tools. Among those who don’t use firm-provided mobile tools, younger financial advisors are more than twice as likely to cite a lack of integration with other tools as a reason.
Social media use by advisors also continues to be a sticking point for the industry. The findings reveal that 42% of employee advisors under age 40 report that their firm does not allow them to use social media to communicate with clients or prospects. Yet 64% of advisors in that age group say social media has helped them strengthen client relationships, and 47% say it has directly helped them win new business.
“The 9-to-5, office-based culture, with its coffee for closers and gong-ringing ceremonies to celebrate new sales, is gone,” explains Mike Foy, Senior Director of the Wealth and Lending Intelligence at J.D. Power and coauthor of the study. “In its place, a new generation of mobile financial advisors is interacting with clients and prospects via a range of digital channels including social media, text, chat and video,” Foy says.
Foy adds that wealth management firms that embrace these technologies and empower advisors to use them effectively will ultimately win the war for talent, but very few are delivering the solutions that younger advisors demand. “When it comes to technology, younger advisors score their firm low on reliability, relevance and responsiveness of support,” he advises. “This group has high expectations and firms will need to raise the bar to meet them going forward.”
In fact, among employee advisors under 40 who are highly satisfied with their firm’s technology, 82% say they “definitely will” remain with their firm, and 76% say they “definitely will” recommend their firm to other advisors. But among those dissatisfied with technology, just 33% say they “definitely will” remain and 29% “definitely will” recommend.
Gender Differences
The study further emphasizes that with current estimates showing that only 16% of all advisors are women, there is a huge opportunity for firms to recruit female advisors, especially given the fact that female investors are notably more satisfied when working with a female advisor.
As such, understanding gender differences and cultural values is imperative for both recruitment and retention so that firms can cater to the needs of both male and female advisors, J.D. Power notes. The study observes that female employee advisors are more purposeful in their reasons for staying with their firm and cite cultural values as a main reason for retention. In contrast, male advisors more frequently state they had no reason to move.
What’s more, an analysis of female advisors who have switched or stayed with their firm over the last two years shows they value development and leadership as top drivers of staying. Examples includes offering relevant training, particularly sales and technology, and being open to changes when markets dictate, followed by an environment of accountability and a culture that values learning and innovation.
The study is based on responses from 3,571 employee and independent financial advisors and was fielded from January through May 2019.
