Aging out: The quiet crisis in the financial wealth advisory business
- July 1, 2022: Vol. 9, Number 7

Aging out: The quiet crisis in the financial wealth advisory business

by John Cadigan

The financial advice industry has a problem that no one seems to want to discuss. Financial advisers are aging out of the industry at an increasing pace, with too few in the pipeline to take their place. There are currently more advisers over 60 years of age than under 30 years and the industry keeps getting older. In fact, after years of flat growth in headcount, the adviser market has begun to contract this year because it’s proven so difficult to bring new talent into the business.

Cerulli Associates expects roughly 40 percent of advisers will age out of the business over the next five to 10 years. That’s the equivalent of more than 100,000 advisers departing the industry at the same time, as the largest single transgenerational transfer of wealth is expected to occur.


Over the next 20 years, $68 trillion will migrate to the next generation, making millennials the richest generation in American history. According to the TIAA Institute, however, only 11 percent of millennials display a high level of financial literacy. So, who will manage all that money? Statistically, only about one-quarter of advisers offer comprehensive financial planning, a service that is key to bridging the advisory gap between generations. And as today’s advisers continue to age out, this number is sure to decrease.

This overall decline in the advice business impacts not only the next generation of investors, but asset managers and insurance providers as well, who typically rely on advisers to represent their strategies to clients. Not having industry advocates interacting with the investing public could have a significant negative impact on organizations attempting to raise capital in the future.


Many advisers were content to sit back and enjoy the recent bull market, as clients watched their account balances keep growing without a lot of heavy lifting on advisers’ part. That all changed with COVID-19. Advisers, many of whom were unfamiliar with getting something as simple as an electronic signature, were forced to be more reliant on technology to interact with clients and get business processed.

Then came the Federal Reserve announcing its intention to raise rates which, among other factors, is causing a return of volatility in the markets and making investors skittish. A responsible adviser can no longer take a passive approach to managing their clients’ emotions and needs to reach out proactively to address client concerns. Advisers now also must deal with increasingly onerous regulations that require more documentation regarding interaction and communication with clients, and the SEC has announced more to come. Life as an adviser is becoming more difficult, not less.


However counterintuitive it may seem, financial planners are not planning for their own long-term financial wellness. Although the industry mandates a written business continuity plan for financial advisory practices, a formal succession plan is not required — yet. A recent Financial Planning Association study showed that about 73 percent of adviser respondents do not have a written succession plan in place, while more clients are asking the question: “What happens to us if something happens to you?” Advisers need to have a solid answer for their clients.

Twelve states currently mandate a written succession plan. In Massachusetts, for example, William Gavin, the secretary of the commonwealth, mandates that sole practitioners have a written succession plan, or they are considered “deficient.” These advisers must take steps to preserve the valuation of their practice. Should a sole proprietor get hit by the proverbial bus, the value of their business goes to zero almost immediately, affecting not only their clients, but also their heirs and loved ones.


Succession planning is a process, not an event. The earlier an adviser can start the process of mentoring a successor, the more successful the transition will be for all parties. The transition process can present any number of obstacles that take time to resolve, yet studies have shown 38 percent of advisers are not even sure how to take the first step. Of course, a valuation discussion needs to take place, and there are many platforms that will objectively guide seller and buyer alike.

In the end, however, almost all advisers say the most important factor is finding a successor who is both ethical and the right match for their clients. Waiting too long to sell your practice does come with a price: A typical client base mirrors its adviser, which means most advisers in their 70s have a practice with depleting assets. As clients enter the distribution phase, assets under management shrink, and the multiple associated with the practice’s valuation declines. Therefore, the time to consider transitioning your practice should start as soon as possible.

To date, it has been a seller’s market, with too many advisers chasing too few opportunities. This dynamic will reverse itself in the near future, as more advisers look to monetize their practice.


If you’re an adviser ready to plan your next steps, start by finding someone with whom you can begin the valuation discussion and explore various options. An experienced professional in the field can help you customize the transition of your practice. If you want to start by simply protecting the value of the practice for your heirs, an agreement can be entered and canceled at any time.

It’s advisable to streamline your practice prior to retirement by shedding your least productive clients so you can focus on more profitable opportunities. You want to make the succession plan as seamless as possible, including determining your retirement date and selecting how long you would like to mentor your successor, to ensure a smooth and successful transition.


John Cadigan is national sales manager for Trust Advisory Group.

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