Building the Next Generation of Financial Advisors

In the closing session at this year’s OneVoice, FSI President Dale Brown focused on what he said was top-of-mind for everyone in the ballroom – and likely across the industry – attracting and retaining next-gen advisors amid a growing advisor shortage.  

“We need younger advisors, we need more diverse advisors because we’ve got a succession planning cliff coming out there in 5, 10, 15 years – pick the date,” Brown said. 

According to new estimates from McKinsey, the financial services industry will face a shortage of roughly 100,000 advisors by 2034. 

Brown asked panelists Dimple Shah, EVP of Advisor Growth and Platform Solutions at Osaic, and Frank Smith, CEO at Private Advisor Group, how their firms are responding to the dearth of young talent and the growing number of aging advisors exiting the profession.  

Next-Gen Community and Smart Economics 

Shah explained that Osaic has succeeded in retaining next-gen talent thanks in part to the firm’s commitment to investing in building a community that includes study groups, special councils and educational programming. She added that strong mentorships and smart economics were taking the effort to the next level.  

“How do you facilitate the entry of new advisors into a structure that is going to set them up for success, where they can be part of a team, where they can learn through apprenticeship, where they can have that day-to-day mentorship?” she posed.  

“I also think the economics are a real challenge for practices looking to bring on new-to-the-industry advisors. And, obviously, it’s an expensive proposition. So how can we scale platforms like Osaic, and allocate capital in various forms – whether that’s through pricing subsidies, whether that’s through repayable loans, whether it’s through other creative capital structures – to make it easier for tenured advisors to bring on junior advisors? Those are a couple of the things that we’re looking at and working on.” 

Smith said Private Advisor Group also emphasizes building a strong community for next-gen advisors. At the same time, the firm nurtures situations in which an advisor already has a successor in mind, such as a family member or junior advisor.  

“We’re very deliberate with our advisor councils,” Smith said. “We like to have both gen-one and gen-two represented, like a father-daughter team, as an example. That gives us a lot of great perspectives. So, it really is about community building and then working with what’s already embedded.” 

Brown then asked the panelists what they saw as the biggest obstacles to making significant progress in attracting, developing and retaining next-gen talent. 

“I think there’s a lot of demand and interest in wealth management, which is awesome,” Shah said. “I think it’s really about creating scaled programs that help newer-to-the-industry advisors enter into teams that are set up to spend the time and have the capacity to invest in their success.  

“Again, I do think that economics are a real challenge for independent advisors who are making trade-offs. Don’t forget, these are small business owners doing it all, so how do you make it easier for them to carve out part of their revenue to reinvest back into new talent? I think ways that we as an industry can support that will go a long way to continue to bring in new talent to the industry.”    

Smith also addressed economics.  

“Obviously, gen-one at some point wants to have liquidity and monetize their practice,” Smith said. “The challenge is that usually, a younger advisor has a really hard time going to get a nine-figure loan to buy that practice. So, we’ve come alongside some of these practices to provide capital in some unique ways.  

“If you solve for that, the second thing is the continuity of the business. Once a successor is identified, the next obstacle, outside of capital or liquidity, is equipping the business so continuity can happen in the handoff, both planned and unplanned, and that’s one of the challenges we see now.” 

Creating Next-Gen Leaders 

Brown ended the panel with a final question: What action can CEOs take to strengthen their ability to attract and retain next-gen leadership? 

“Too often, we observe where a plan only goes into effect or is thought about in reaction to duress,” Smith said. “That is a really terrible time to start working on the business, and sometimes you can’t control that. So have a plan. Put the plan into place while things are going well.” 

Meanwhile, Shah recommended CEOs focus on building teams that share camaraderie and the same mission. 

“Every potential executive here interviews with multiple members of the existing executive team, and it’s a very diverse mix of people,” Shah said. “We intentionally put people who haven’t been there that long with people who have. I think it’s a good way to ensure we’re continuing to build the team, not just looking for individual superstars, and that’s an effective part of our success.”