That’s not someone from a Sherlock Holmes story. But it could be very well be my old college buddy Bob (not his real name, of course).
Bob was of the era in which aspiring stockbrokers went to New York immediately upon graduation to be trained by one of the wire houses. Bob came back home as a full-fledged Registered Representative with his new Series 7, and immediately launched his investment career.
But that was then, and this is now. Registered Reps are now called Financial Advisors or Wealth Managers. Firms like Bob’s may have gone through one or more ownership changes or may not even exist anymore. And folks like Bob? Just like the rest of the aging population, they’re retiring.
Cerulli Associates, Inc. the international research firm, provides us some telling statistics:
- At the end of 2009, 36% of brokers were age 55 or older.
- Between 2004 and 2009, the total number dropped 1% percent to 334,000.
- In 2011, the number fell by approximately1.3% or 40,000.
Cerulli projects that the number will decline by another 18,600 over the next five years.
It not just the numbers of advisors that concerns the investment firms. It’s the amount of assets involved. Accenture, the international management consulting firm, estimates that financial advisers past the age of 60 control $2.3 trillion of client assets.
Who is going to replacement them? Reuters columnist, Mark Miller, writes about what many see as a coming brain drain, Wanted: Financial advisers who aren’t about to hang it up. Miller points out that
The adviser shortage points to an area of opportunity for young people and midlife career changers. The Certified Financial Planner Board of Standards (CFP Board), which grants the CFP certification, is working with colleges and universities to develop and operate CFP training programs, and 360 institutions are participating, a figure that has jumped 30 percent over the past four years.
In the meantime, with training programs cut back, the emphasis has been recruiting experienced advisors with established books of business.
But waiting in the wings is something that would make Will Smith cringe: what John Shmuel writing in the Financial Post calls the Rise of the robo-advisor. In reality, they are automated advice firms using complex computer algorithms to manage portfolios.
These firms are still in the start-up phase, but growing fast. Wealthfront which calls itself “the world’s largest & fastest-growing automated investment service” has over $1 billion in client assets since its launch in December, 2011.
Who can say how much these automated services will penetrate the human investment advisory marketplace. If we extend the concept under the umbrella of artificial intelligence which has experienced quantum growth, it could be huge. As to the social consequences and ethics of artificial intelligence, that’s another matter.
Image from May 2010 issue of Claims Magazine.
