Cerulli: Banks Will Keep Losing Their Best Advisors if They Don’t Change

Companies need to adopt practices more common at wirehouses and RIAs to better retain talent.


Illustration by RIA Intel

Banks and credit unions are good at attracting young advisors — but they’re failing to keep them.

The inability to hold on to advisors long term comes as the total number of advisors shrinks and amid zealous competition from other organizations.

The financial advisor workforce is aging and retiring at a faster rate than new professionals entering the industry. The number of advisors is expected to remain static in 2023, fall .40 percent in 2024, and fall again by .80 percent in 2050, according to Cerulli Associates. The decline comes even as the market downturn has prompted some advisors to delay their retirements.

The intensifying competition is especially worrisome for banks and credit unions that employ financial advisors, according to a report by Cerulli and the Bank Insurance & Securities Association.

“While advisor headcount in the bank channel has remained relatively stable, as the average age of the advisor force rises, banks and credit unions need to consider new approaches for recruiting and retaining younger advisors who can succeed aging advisors as they retire,” the report says.

Over the last five years, the number of advisors at retail banks has grown slightly at an annual rate of .7 percent. At the end of 2021, there were 24,235 bank-based advisors, according to Cerulli.

Banks have unique recruiting advantages over independent wealth management firms. Nearly half of all wealth management clients say they want to work with a single financial services firm.

Banks and credit unions also have other employees they can recruit to become advisors, talent pools that independent wealth management firms lack. New advisors also earn a salary and get a continuous flow of referrals from their employer. “We found that was really the number one reason why advisors join and remain at their banks and credit unions as opposed to seeking out opportunities,” said Chayce Horton, high-net-worth analyst at Cerulli, commenting on referrals.

Those advantages, coupled with advisors in local branches being closer to their own communities, are why advisors at banks and credit unions are younger and slightly more diverse. Cerulli and BISA found that 16.9 percent of bank advisors were under 35 years old (compared to 11.6 percent of all advisors), and 29.5 percent were between the ages of 35 and 44 (compared to 23.9 percent of the total.)

The majority, or 76.8 percent, of bank-based advisors are white, but the group is significantly more diverse than the industry. Asian advisors are 5.7 percent of the workforce at banks and nearly twice as many bank advisors are Black (5.4 percent) compared to the industry.

The characteristics of a bank or credit union are “helpful for more diverse and historically underrepresented communities, particularly advisors whose communities don’t have that natural network. They can’t bring a hundred contacts — friends and family that all have a hundred thousand dollars to bring to a firm,” Horton said. “A bank is really a natural landing spot and a real differentiator for all demographics, but particularly those who are historically underrepresented in the advisor force.

Still, banks and credit unions must simultaneously leverage their advantages and improve their retention rates or risk not having enough financial advisors to meet the wants and needs of their businesses.

It’s a challenge they might be facing sooner than other types of wealth managers, too. The average bank advisor retires at age 64 but the industry average is 68, due partly to advisors in other channels phasing into retirement, according to the Cerulli report.

RIAs offer advisors potentially better economics, more control over how they run their practice, and the opportunity to own all or part of a business. Banks can deliver some of those things, they just haven’t done a great job at it, Horton said.

“Advisors want more independence when they serve their clients, a higher level of ownership and degree of ownership of their practice, and also the ability to have more control over the succession of their practice and transitioning those clients onto the next generation of advisors,” he said.

In interviews with 20 advisors from banks and credits unions, half were also dissatisfied with the technology they used.

One advisor at a regional bank, who anonymously commented on the bank’s technology, said they wished for all new systems and that these systems were fully integrated.

“Our legacy technology systems and programs are really bad. When I was at [wirehouse], we were able to do things a lot easier than we are now,” the advisor said. “I have to set the expectation with my clients that it’s not going to be an easy process. We could be doing a lot more business, but at this point we’re just doing what we can.”

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