Skip to main content

You are here

Advertisement

Uptick in Attrition Risk Among Top Financial Advisors

Despite last year’s positive market conditions and relatively upbeat investors, overall satisfaction among financial advisors with their firms declined last year and the drop is highest among top producers, J.D. Power warns in a new report.

According to the firm's 2017 U.S. Financial Advisor Satisfaction Study, declines in advisor loyalty are equally concerning to firms, with the percentage of Employee Advisors indicating an intention to leave their firm increasing from the previous year. Among those intending to remain, 38% point to contract requirements, compensation, or simply the lack of a compelling reason to move on as reasons. The study notes that many such advisors “lack genuine, enduring firm loyalty, and should be considered at risk of attrition when their contract ends or deferred comp is fully realized.”

The study, which measures satisfaction among both employee and independent advisors, explains that a convergence of factors, such as continuing changes to compensation, uncertainty over the fiduciary rule, emerging technologies like robo-advisors and declining confidence in firm leadership are all contributing to the trend.

“[Advisors] just starting out get a certain degree of instant credibility with prospects from the brand as well as significant training and professional development opportunities, but for the most established advisors, the firm’s value proposition can be less clear,” says Mike Foy, director of the wealth management practice at J.D. Power. “Firms need to continue to raise their game to keep these high-producing advisors happy and productive, both to retain client assets and revenue in the short term, and also as a key part of a longer-term strategy to mentor and team with the next generation of advisors.”

Among the study’s key findings:


  • Continuing confusion over fiduciary rule: 41% of employee advisor respondents indicate they do not completely understand the rule, and 64% expect to lose smaller clients as a result. In addition, 58% expect the rule to negatively affect their profitability, while 44% believe it will be more difficult to attract new clients.

  • Less satisfaction among higher producers: among advisors with more than $1 million in annual production, overall satisfaction is down, but is up slightly for advisors with less than $250,000 in production.

  • Leadership, strategic vision key to winning back advisors: 27% of higher producers say they “strongly agree” that leadership communication is both timely and useful, while 35% “strongly agree” that management is leading in the right direction. The study notes that the latter is “critical now as firms navigate through transformational industry changes that potentially affect what kind of clients advisors work with, what products they sell and how they are compensated.”

  • Elevated demands among higher producers: Top-producing advisors have both greater needs and higher expectations in terms of technology and operational support than lower producers. The study shows that top producers averaged 22 compliance contacts over the past year, compared with just 11 for lower producers, and also faced longer average resolution times.

Advertisement