America’s financial services industry is facing a significant challenge as the baby boomer generation approaches retirement age, leaving behind a void that financial advisers must address. With baby boomers constituting over one-fifth of the U.S. workforce, approximately 41 million of them are still employed while around 10,000 Americans retire each day. This demographic shift demands thoughtful planning to secure the future for both clients and businesses, according to experts in the industry.
Succession Planning Becomes a Priority
The average age of a financial adviser in the industry is in the mid-50s, and alarmingly, less than half of these advisers have established succession plans. Jeff Vivacqua, the president of growth and development at Cambridge Investment Research, emphasized the significance of succession planning as a means to address the impending wave of retirements. “The first thing is to get them to remember that they’re a small business owner, we want to protect their largest asset, and let’s do that first by doing the continuity plan for death and disability, and then work up to the ideal strategy for succession, which is their exit and how they go out,” Vivacqua explained.
Building Continuity and Long-term Relationships
For financial advisers, it is vital to communicate with their clients about both continuity and succession planning. Ensuring that clients understand the process and have peace of mind regarding their financial future is crucial. By sharing information about potential contingencies and providing a clear plan of action, advisers can build long-term relationships based on trust and transparency.
Nurturing Future Relationships
“It’s the client’s best interest… it’s how do they build a plan that continues the investing relationship with the client into the future generations, whether it’s after the current financial professional or after the current client into that client’s next generation of where their estate may go to and how that’s dispersed,” Vivacqua said. He highlighted the importance of nurturing relationships that extend beyond the current client-adviser dynamic, spanning into the future generations.
Challenges in Attracting New Talent
The aging U.S. workforce not only poses challenges for succession planning but also affects the availability of new talent in the financial services industry. With a decline in new entrants over the past decade, there has been a noticeable decrease in the total number of active financial advisers. Data from the Bureau of Labor Statistics reveals that as of 2021, there were around 330,000 financial advisers. However, more recent figures suggest this number has decreased to approximately 280,000.
Bridging the Talent Gap
Jeff Vivacqua emphasized the urgent need to develop new talent in the financial advisory sector. The average age of financial advisers falls within the range of 52 to 59 years old, and while Cambridge Investment Research boasts a comparatively younger cohort at 53 to 54 years old, the demand for new professionals is undeniable. Attracting and nurturing new advisers is essential to ensure the industry’s sustainability.
Cambridge Investment Research’s Role
Cambridge Investment Research, an independent broker-dealer, stands at the forefront of addressing these challenges. With around 4,000 independent financial advisers across the country, Cambridge offers a platform that allows these professionals to efficiently conduct their business while receiving supervision from the firm.
In conclusion, the imminent generational transition in America’s workforce is urging financial advisers to plan ahead and implement successful succession strategies. By building strong relationships with clients and attracting new talent, the industry can navigate this transitional phase with confidence and ensure a prosperous future for both businesses and their clientele.
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