Looming Advisor Shortage Could Top 100K Over Next Decade

Call in the reinforcements.

The wealth management industry is facing an upcoming advisor shortage, and it could be worse than first expected. While the workforce has grown 0.3% annually over the past decade, it’s projected to sink 0.2% per year moving forward, according to a McKinsey & Co. report this week. As retirements outpace the number of new recruits, the industry could dwindle by 100,000 advisors come 2034. That could leave thousands of Americans without proper financial planning, even as the number of wealthy households ticks up and investors become more willing to pay for financial advice. 

“Advisor headcount is projected to go down, and that was not the case before,” said McKinsey associate partner Vlad Golyk. “The industry finds itself at a point where it needs to act now.” 

Supply and Demand

The problem is that 110,000 advisors — around 38% of the workforce managing 42% of industry assets — are expected to retire in the next decade. To fill those seats, the industry would need to bring in 30,000 to 80,000 new advisors over the next 10 years. Just 8,000 have joined over the past decade.

But it’s not all doom and gloom. The number of households with at least $500,000 in investable assets will increase by as much as 5% per year through 2034, according to the report. The research also found clients are willing to pay top dollar for advice:

• The share of investors seeking more than just portfolio management, like tax and estate planning, grew to 52% in 2023 up from just 29% in 2018. 
• Nearly 80% of wealthy households would pay a premium of 50 basis points or more for human advice rather than low-cost robo-advisors, per McKinsey. 

“You’re going to have fewer advisors, more of them are going to be older, and productivity gains will be smaller,” Golyk told The Daily Upside. 

Requesting Backup. Though the industry is hiring younger talent, training programs often have high dropout rates, Golyk said. A big issue is that the industry doesn’t offer the mouth-watering salaries that appeal to recent college graduates, who often gravitate toward jobs in investment banking or on trading desks instead. The sales-based commission model can also be a turnoff.

Firms stand to benefit from reevaluating the role of an advisor, especially as clients look for services beyond just portfolio management. “Think of it more like a financial coach, and you’ll attract a broader set of creative ideas and talent,” Golyk said.