Fidelity released its Future Leaders Study, which found three steps RIAs need to take to support young advisors in the firm if they hope to keep them.
The report follows the "Recruiting Redefined" study of 2014, which examined ways for firms to find talented young advisors. Fidelity interviewed "future leaders" in a blind study to ask them about what made them stay at their firms. Participants were between the ages of 27 and 40, and had been working as an advisor for three years, with a 15% increase in AUM last year.
"What we focused on in this study is once you've hired the advisors, how do you retain them? How do you develop them to be a leader in your firm?" Jylanne Dunne, senior vice president of practice management and consulting for Fidelity Clearing & Custody Solutions, told ThinkAdvisor on Tuesday.
The study found 37% of current owners expect to leave the business in the next 10 years. Although the number of advisors joining the industry is finally increasing (a mere 1.1% in 2014, the first time advisor headcount has increased since 2005, according to Cerulli), 20% of senior advisors said their limited expertise was a challenge to their being considered as a successor.
A State Street Global Advisors report in October estimated almost 70,000 advisors with more than $2 trillion in assets under management will retire over the next five years, two-thirds of whom do not have a succession plan in place.
Firms like Live Oak Bank are making purchasing a retiring advisor's firm more attractive — and feasible — to young advisors, but Fidelity found three-quarters of RIA firms don't have their next generation of owners in place.
"As much as our advisor clients consistently tell us that they'd like to be able to focus on an internal transition when they leave the firm, they also have indicated that they do not have the talent in house in order to be able to execute on that," Dunne said.
Fidelity identified three ways that advisors who manage the "where to get talent" hurdle can get keep that talent. First, they have to create a stable environment to keep young advisors in the industry.
Variable compensation, unclear career paths and difficulty establishing their own book of business make the advisory industry unattractive to many new advisors, Fidelity found. Using a team structure, one-on-one coaching or formal mentoring can help overcome these challenges.
