Whether you work for a bank or a wirehouse, you’re probably seeing many of your fellow advisors going gray. You may even have a few — or more than a few — grays of your own.
The changing hair color shouldn’t surprise you. The average advisor today is 55 years old, according to Tiburon Strategic Partners, a strategy consulting and market research firm in Tiburon, Calif. Bank advisors are slightly younger. They’re 52. Tiburon estimates that more than one-third of all advisors — 36% — are over 55. Only 13% are under 35.
An aging workforce has many career implications for advisors of all ages, so I thought it would be a fitting topic for my first post on Movin’ On Up, a new blog about career issues facing advisors.
First, let’s look at the implications from the perspective of the bank. A graying advisor workforce puts banks in a difficult situation, especially if large swaths of advisors start retiring all at once. Banks are at risk of losing the clients their silver-haired advisors worked so hard for so long to serve.
“Clients may not get the service they’re used to and leave,” says Todd Colbeck, president of Colbeck Coaching Group.
It’s a problem for banks, but an opportunity for bank advisors, young and old, if they think ahead. Enterprising bank advisors planning to retire can buddy up with younger advisors and put them in place as potential successors. Both senior and junior advisors will win from teaming up.
Junior advisors will have a chance to work with clients they otherwise would not have been able to gain on their own. Market-weary clients today want advisors with experience and a track record, even recommendations. Teaming up with senior advisors is a good way for beginning or aspiring advisors to get started in a business that many say is much harder to break into than it was 20 years ago, when there were fewer regulations and no “do not call lists.”
The senior advisors will gain an extra set of hands to help manage client accounts. But more importantly, by having people in place to take over when they retire, they will increase both the value of their books of business as well as their ability to negotiate a payout for all the business they generate for their banks. The danger for advisors is that they “don’t get compensated for what they’ve built,” says Colbeck.
Banks have different rules for how they compensate their advisors. Some might offer a bonus, for example, based on the size of the advisor’s book, says Colbeck. Some banks, however, do not compensate advisors at all. For the banks that do reward their retiring advisors, it makes sense for senior advisors to team up with younger ones.
Many banks are already setting up these teams, says Sophie Schmitt, an analyst at Aite Group, a research and advisory company. Best practice firms, she says, are taking the transitioning of business to a new generation of advisors very seriously. In addition to pairing senior advisors with junior ones, they’re putting in place sun-setting programs to reward advisors for their books of business.
In follow-up posts, I’ll be writing about related topics stemming from the issue an aging workforce, including how advisors can manage their practices to maximize the value of their books. In the meantime, send me your thoughts about this post and topics you would like to see covered. I’d love to hear from you!