The Financial Advisor Retirement Wave

According to the most recent report from the Bureau of Labor Statistics, there are 254,030 personal financial advisors1 and these advisors serve over one-third of Americans.2 Financial advisors can support and guide their clients in some unexpected yet important ways. A recent article3 in Financial Advisor magazine highlighted some ways in which financial advisors remove financial pressures for people, which in turn enriches their lives. These include:

1) Helping people alleviate marital strife due to finances

2) Helping reduce stress with strategic financial planning

3) Helping reduce workplace distraction so folks can focus on their jobs, not on managing their finances

 4)Helping people identify opportunities to give charitable donations

An Alarming Trend

If you believe that financial advisors provide what America needs, then the pace of advisors retiring from the industry becomes truly concerning. According to Cerulli, an industry think tank and research firm, 37% of financial advisors managing $10.4 trillion assets will succeed out of the industry over the next 10 years and the total headcount of advisors will begin declining in 2023.4

This trend could lead to a meaningful shortage in advice and services provided to Americans by financial advisors. This concern needs to be addressed on two fronts; build more capacity within the business and provide a smooth transition of client relationships from one generation of advisor to the next.

“America needs what financial advisors provide but with the increased pace of succession, efforts to improve capacity and smooth the transition of clients from one generation of advisor to the next are needed. Workflow and automation are some of the best solutions to a potential challenge for the investment advisor industry”

Building More Capacity

Capacity can be built with five strategies.

1) Good human capital planning and execution. Getting the right staff in the right positions with the right skills can leverage the reduction of advisors so each can serve more clients. However, with an overall labor shortage, it may be difficult to add staff. This makes carefully organizing and training staff even more critical.

2) Leveraging outside resources for critical functions such as asset management, financial planning and marketing will help build capacity without the need to add more staff or advisors. There are several service providers in the industry that can be leveraged for a fee.

3) Streamlining service offerings can go a long way to build capacity. This starts by segmenting clients into three or four service groups. Many advisors go this far but fail to take the next step – designing and implementing a differentiated service offering for each segment. Too often the second-tier client group receives nearly the same service level as the top-tier group, missing an opportunity to build efficiency and add capacity while still delivering value to the second-tier group.

4) Workflows can help coordinate the activities of the staff. The most critical step in any workflow is the hand off from one step to the next or from one staff member to the next. At least three core business processes should be supported by workflows: client onboarding, client service meetings, and client requests services.

5) Automation, particularly of the workflows, could increase capacity. Often the Client Relationship Management (CRM) system is where workflow automation is housed. Using centralized files and automated notices to staff members can decrease the risk of handoffs and accelerate service delivery.

Provide a Smooth Transition of Client Relationships from One Generation of Advisor to the Next

This is how Live Oak Bank serves this industry. We provide resources and content to Financial Advisors on how to:

1) Prepare for succession

2) Maximize the value of a business

3) Find the best buyer

4) Become an attractive buyer

5) Source sellers

6) Structure a deal that benefits both buyer and seller

7) Manage the risk of transition

8) Manage the change for buyers, sellers, and staff

In addition, we provide financing for these transitions. We leverage automated workflows to market, originate, underwrite and close loans.

Through our technologysupported workflows, we have smooth transitions from one phase of loan processing to the next. Also, we can diagnose process inefficiencies and create solutions. Finally, we can remove some of the workload from the staff by providing cost savings to the bank and accelerating our time to close.

Summary

America needs what financial advisors provide but with the increased pace of succession, efforts to improve capacity and smooth the transition of clients from one generation of advisor to the next are needed. Workflow and automation are some of the best solutions to a potential challenge for the investment advisor industry.