One key to retaining talent is making sure the right pay structures and work arrangements are offered to advisors. That entails being clear on whether employees desire a client-servicing role, or one that is commission-based and centered around getting new leads.
“What is their goal?” Marci Bair, president and founder of Bair Financial Planning, says of advisor talent. “Do they want to be an advisor where there is no set salary and the sky is the limit on their income? Or if they are commission-only with no set salary, and their [guaranteed] income could be very low.”
There is also a scenario where advisors may prefer a hybrid role as a W-2 employee, “where there is a minimum on the salary where they can pay their bills, but there are other incentives based on some percentage of the business they bring in or through a profit-sharing structure,” Bair said.
“It seems like you’ve got more W-2 models than ever, where an advisor just wants to be an advisor.
She believes more advisors have opted to work under W-2 contracts in the last couple of years for a number of reasons.
“I think it’s a combination of some advisors nearing retirement, selling their practice to a larger organization and staying on as a W-2 or salaried advisor for a couple of years. Then there’s other advisors who are just tired of running their practice, and don’t want to worry about running the business, payroll, rent and compliance,” Bair said.
A third subset of professionals contributing to this trend are “younger advisors that are still growing their client list and want that W-2 salaried position,” for more financial stability, she added.
Research shows that the U.S. wealth management industry will be facing an advisor shortage in the coming years as more advisors retire.
By 2034, the workforce is expected to have a shortage of roughly 100,000 advisors, according to estimates by McKinsey & Company.
“The advisor workforce has grown at a meager 0.3 percent per year in the last ten years,” The McKinsey report said. “The outlook is even more challenging: Advisor head count is projected to decline by about 0.2 percent annually. Retirements outpace recruitment, as advisors are on average ten years older than members of similar professions. An estimated 110,000 advisors (38 percent of the current total), representing 42 percent of total industry assets, are expected to retire in the next decade,” the report said.
