Solving the Advisory Firm Turnover Problem

Scott MacKillopAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

First the good news. The financial advice business is growing nicely.

According to research by The Ensemble Practice, the median increase in assets under management in 2023 was 17.1%. New client relationships grew by 7.2%. Fifty-four percent of firms increased their headcount and 66% hired to fill new positions to meet this growth.

Now the bad news. That growth did not go smoothly.

The study found that 57% of the firms surveyed had resignations, 36% let staff go for performance reasons, and 64% had to hire to replace departures.

A bumpy ride, at best.

To make matters worse, a recent Cerulli study found that a little over 37% of advisors plan on retiring in the next decade. Cerulli also found that the rookie failure rate for new advisors entering the industry hovers around a staggering 72%.

There are plenty of consulting firms that, for a fee, will help firms smooth out their growth path. This includes both The Ensemble Group and Cerulli – two highly credible and experienced outfits.

I would like to offer guidance to solve this high-turnover personnel problem. It does not focus on areas like training, compensation, or the fine points of hiring and recruiting that traditional consulting firms might address. Instead, I offer a collection of observations and beliefs based on my 48 years of experience in the financial services business, which includes stints as either president or CEO of five different TAMPs and a consulting firm.