A new study finds that a looming shortage of advisors will be one of the challenges facing the wealth management industry over the next decade, reports AdvisorHub.
The report by McKinsey & Company found that overall, the industry entered 2025 in a position of strength, with growing demand for services as Americans become wealthier and their needs become more complex.
The concern, however, is having the supply needed to meet the demand, with an estimate finding that at current productivity levels, there will be a shortage of about 100,000 financial advisors by 2034.
Over the past decade, the advisor workforce has only grown at 0.3 percent per year, and it is expected to begin declining by about 0.2 percent per year. McKinsey & Co. pointed to the reason for this situation. “Retirements outpace recruitment, as advisors are on average ten years older than members of similar professions,” the report said. “An estimated 110,000 advisors (38 percent of the current total), representing 42 percent of total industry assets, are expected to retire in the next decade.” The shortfall will be about 30% of the 370,000 advisors that McKinsey estimated will be needed by 2034 for wealth management in the U.S.
“Even if the advisor population kept growing at historical pace, it would only reduce the shortage by about 15,000,” Vlad Golyk, a partner at McKinsey and study co-author, said in an interview. “It is really the demand that is going up.”
The demand is reflected by the rising wealth of the U.S. population. The number of affluent households (those with at least $500,000 in investable assets) will grow at 4 to 5 percent per year, compared with 0.6 percent projected growth in the overall population, the study said. Meanwhile, a survey found that clients increasingly seek more holistic advice as they age, and their needs become more complex across the full spectrum of planning services and balance sheet and investment products.
To address the shortage, the report finds that firms will need to increase productivity by 10 to 20 percent and attract new talent to the industry at a faster rate: 30,000 to 80,000 net new advisors over the next ten years, compared with 8,000 in the last ten years. Besides recruiting new advisors, McKinsey estimates that firms will need to increase productivity by 10% to 20% to meet the talent shortage. While learning and technology can boost productivity, firms will also need to refine their approach to attracting new talent.
“Without resolving this fundamental supply bottleneck, the industry will continue to find itself in a zero-sum competition for advisor talent,” the authors of the study wrote.
They said that firms should look to on-campus recruiting, structured internships and rotational programs. New, inexperienced hires are seen as an important and increasingly diverse talent pool while firms that take steps to attract more female advisors will have a competitive advantage.
The study suggested that firms increase their presence on college campuses where investment banks, consulting firms and other financial services groups have long dominated recruiting. McKinsey added that firms should also consider individuals who have failed out of major advisor development programs, as these candidates could excel in a different firm and culture and may have already obtained required licensing and basic training.
As for ways to increase productivity, the study pointed to significant improvement in lead generation, teaming and practice management — optimizing skills of team members, increasing specialization and leverage; and using technology-enabled by generative artificial intelligence.
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