Joseph H. Clinard Jr. is 76 and
spends his days planning for retirement — just not his own.
Mr. Clinard has worked for more than 50 years as a financial
adviser, and he has no plans to stop anytime soon, despite the fact that many
of his clients have stopped working or soon will.
“I don’t think my wife wants me home, to tell the truth,” Mr.
Clinard said.
Many of Mr. Clinard’s peers share his outlook. The average
financial adviser in the United States is older than 50, a number that shows no
sign of getting lower because relatively few young people are interested in the
work. That is creating a problem for Wall Street, which after the financial
crisis likes the idea of managing other people’s money more than it did before.
As both independent firms and large broker-dealers attached to investment banks
try to expand their asset management businesses, they must figure out how to
attract and retain a fresh pool of talent that is increasingly looking to find
its riches elsewhere.
“All of us in this industry are facing the same dilemma, which
is, where is that next generation going to come from?” said Erica McGinnis, the
president and chief executive of the AIG Advisor Group, where the average
financial adviser is 54. “There certainly are people who are not being served
by financial advisers because there are not enough of them.”
Of the 315,000 advisers working in the United States, only 5
percent are younger than 30, according to data from the consulting firm Accenture. Richard Stein, a partner at
the executive recruiting firm Caldwell Partners, estimates that half of all
advisers working today are within 15 years of retirement.
At the same time, firms like Morgan
Stanley and Bank of America Merrill Lynch, which
rely on thousands of advisers to serve their clients, have made it clear that
they intend to increase their wealth management businesses as traditionally
more lucrative operations, like trading, have largely dried up.
“It’s a real problem for them because the only way they can grow
their assets under management is by hiring new advisers, and there’s a limited
supply,” Mr. Stein said.
As a whole, Wall Street is a less attractive place to work than
it used to be for new graduates. Many Americans distrust the banking industry
more now than they did before the financial crisis, and the paychecks aren’t as
large. Fewer college students want to go into the financial services sector at
all, Mr. Stein said. Instead, they are drawn to budding social media and
technology start-ups, hedge funds and other fields beyond the financial
services sector.
In one sense, that could mean less competition — and more
opportunity — for younger people who choose to become financial advisers. But
the compensation model has changed as well.
Advisers used to rely on commissions, meaning that they would
make money from every transaction executed on a client’s behalf. But the
industry has shifted more toward a fee-based model, which pays an adviser a
percentage of the money under management. That may be fine for an older adviser
who has a large book of clients, but it can be a deterrent for people just
starting out in the business.
Big firms say that the fee-based model helps align the interests
of clients and their advisers, but it is also contributing to their staffing
problem. Big retail brokerage firms are increasingly losing advisers to
independent firms, which offer a bigger cut of fees. According to Mr. Stein,
more than $100 billion followed brokers from the big firms to independent ones
last year.
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