Opinion: Six reasons we’re not attracting young advisors

I recently sat down with a client who had family pictures decorating his office. I asked if his children are going into the business. “Absolutely not,” he said. “I never want them to endure what I’ve gone through.”

The industry has a big problem. Entering the wealth management industry is more difficult than it should be. Whether an individual enters a bank, independent brokerage or asset manager, rookies face nearly insurmountable odds.

There are six reasons we don’t see more young people entering the wealth management industry.

First, new advisors are given unrealistic asset targets. They face competition inside and outside their organization. Meanwhile, Canada’s Anti‑Spam Legislation makes it difficult to grow a practice with electronic messages.

Second, too few organizations have formal succession plan policies. The banks require advisors to create their own legacy plans, but they are voluntary, self-triggered mechanisms. Most wealth advisors don’t wish to end their careers. Retirements are usually triggered by an event that forces their hand.

I’ve seen advisors suffer critical illness or even death before any legacy plan was created. By that time, it is too late. In a case like that, both the firm and its clients are compromised.

Banks have their own standard practices. While senior advisors in bank-owned wealth channels may influence succession planning, many cannot unilaterally decide who takes over their practice when they retire.

This disenfranchises both the retiring advisor and the associates under them. It is a major reason young people are reluctant to enter the industry. A rookie has little incentive to invest years into a practice if they know their chances of inheriting or buying it is slim. No wonder there’s a trust issue.

Bank dealers are notorious for operating an old boys network. Senior retirements occur and most often, other fellow senior colleagues have first option on any retirement practice for sale.

This often eliminates associates who invested years with the senior advisor and was most familiar with the retiree’s clientele. That creates flight risk — among clients and the young advisor who’d expected to take over.

Third, an increasing number of banks and mid-sized broker dealers are buying advisor practices to build scale. These firms often don’t have a long-term continuity plan. The deals transfer ownership from advisor to firm, thus further disenfranchising advisors.

Fourth, young people are excited about providing advice and managing investments. But they’re less enthusiastic about the sales process — a key competency. Gathering clients is difficult. And while few advisors enjoy the function, it is a necessary one.

Fifth, few of the industry’s veterans have adapted to the realities of today’s industry, which makes them ineffective mentors. They lived by an old code of personal connections, personal networks, clubs, old fashioned door knocking and cold calling.

They came up in an era of less competition with a smaller high-net-worth market. There were few regulations prohibiting sales activities that are no longer tolerated. 

Sixth, young professionals are more attracted to online platform-based careers. They’re turned off by commuting, the manual labour of client-facing responsibilities and a variety of other requirements associated with traditional organizations.

There is hope

There are two ironies at play here.

First, a career in wealth management can be both financially and professionally rewarding. The opportunity to make a meaningful difference in a client’s life surpasses many other lines of work. If young people understood this business better, they’d be more attracted to it.

Second, there are changes underway in our industry that make it more important than ever for Canada’s wealth management industry to add diversity, in terms of age and much else.

The country’s demographics are changing. The Great Wealth Transfer is expected to put more money into the hands of more women and young adults. And a growing demand for digital and AI-supported client experiences make it vitally important that the industry attract tech-savvy professionals.

We need to provide young people compelling reasons to engage. The industry must do a better job of marketing itself; it must deliver a better onboarding process; and provide real opportunities for professional advancement.

This means creating more educational partnerships, long-term training programs, realistic industry functional expectations, real meaningful succession planning and an ability to adapt to a new world with fast changing rules.