The RIA Industry Is Getting Younger. Not Your Average Advisor

Financial advisors are probably closer to retirement than many of their clients. 

With the workforce hitting 56 years old on average and quickly heading toward the exit, the wealth management industry is scrambling to attract the next generation of advisors. Only about a quarter of trainees last past their third year. Thankfully, the RIA sector as a whole is getting younger, with 46% of employees under the age of 40, according to Charles Schwab’s 2024 compensation report. But, the search for younger advisors needs to pick up steam if firms want to remain competitive.

“We hear about it every single day,” said Jason Diamond, executive vice president of recruitment firm Diamond Consultants. “It’s a problem that’s not even on its way toward being solved.”

What’s the Problem?

The short answer is that the industry will be understaffed by some 100,000 advisors by 2034, according to McKinsey & Co. The workforce has grown minimally over the past decade and is expected to decrease 0.2% per year moving forward, with retirements far outpacing new talent. Firms are bolstering their recruiting efforts, but dropouts remain high, and in the past decade, just 8,000 new advisors have joined the industry.

If firms are going to remain competitive in the future, they’re going to need to hire. That’s where the trouble starts:

• Only about 6% of certified financial planners are under the age of 30, according to data from the CFP Board. CFPs make up a third of the US’ financial advisors.
• Roughly 70% of  CFPs are 40 and older. 

The shortage could cause a succession crisis, higher fees, and a lack of innovation, said Daniel Milks, founder of Fiduciary Organization. “The traditional wirehouse model, which once recruited heavily, has shifted away from training new advisors, while many independent firms struggle to provide structured entry-level opportunities,” he told Advisor Upside.

You Wanna Be a Financial Advisor?

The good news is that more young people are becoming interested in wealth management. Registration data for the November 2024 CFP exam showed that 39% of applicants were under 30, up from 37% the previous year. However, there are plenty of hurdles upon entering the industry, including building a book of business (often from scratch) and dealing with age bias. “It’s hard for a 22-year-old to ask someone who is 60 to trust them with their life savings,” Diamond said. “The old thinking is it requires some gray hairs on your head.” 

So what’s the industry to do if they want to secure the next generation of advisors?

Share the Love. Building a book of clients takes years, and many new advisors are often left to their own devices. “Firms are basically saying, ‘If you can become a 35-year-old rock star, great,’ but they don’t provide the mechanisms to make that happen for the 23-year-old with no book,” Diamond said.

To support junior advisors’ careers, he suggested that the old guard help them gain new clients. Senior advisors don’t need to hand over their entire book but should mentor younger advisors with less lucrative clients, leaving the best clients for themselves. This approach allows senior advisors to focus on high-priority clients, while giving younger advisors a chance to earn a living and learn the business. “It’s one step back for two steps forward,” Diamond said.

Start Them Young

One of the most tried-and-true methods to get fresh recruits for any industry is the college-to-career pipeline. Unfortunately, compared with investment banking and securities trading, wealth management just isn’t the most popular kid on campus, mainly because the former are more lucrative careers right off the bat. Additionally, smaller RIAs often lack the resources to engage with students. 

“That’s a huge miss because there are very successful investment bankers, but they’re also working a trillion hours,” Diamond said.

There are, however, a handful of universities with noteworthy financial planning programs, including Utah Valley, Kansas State, and the University of Georgia. Texas Tech even won the Financial Planning Association’s Financial Planning Challenge for the second year in a row in September. Plus, major firms like Charles Schwab have a strong presence on campuses through scholarships, outreach programs, and its Schwab Advice Academy.

“Advisors used to say it took about 15 years to take someone from university and get them to head advisor,” said Lisa Salvi, Schwab Advisor Services managing director. “And now in many cases, it’s been cut down to about seven because of how much technical proficiency they have coming out of these programs.”

Be Supportive. Education and mentorship are crucial, but firms can also offer public recognition. Citrine Capital associate wealth advisor Samantha Mockford recommends acknowledging when younger advisors pass exams by posting about it on the firm’s website and in client newsletters. “When we celebrate the journey and not just the destination, more people will envision themselves on that path,” she told Advisor Upside.

And when all else fails, more competitive salaries certainly help.