Faced with a growing list of responsibilities and limited time to accomplish them, many advisors have grown dissatisfied with their jobs.
A new study by J.D. Power surveyed 4,183 employee and independent financial advisors from December 2022 through April 2023 and found that 30 percent of employee advisors and 28 percent of independent advisors said they “probably will” be working at their current firm in the next one to two years. J.D. Power found that among the groups who indicate that they’ll “probably” be employed at the firm in a year or two, overall satisfaction and net promoter scores — the measure of an advisor’s willingness to promote or recommend their firm — were significantly lower compared to advisors who said they would “definitely” be at the firm in two years.
“A lot of firms emphasize that they have very high retention rates — that they have very few advisors leaving,” said Craig Martin, head of wealth and lending intelligence at J.D. Power. “But I think the critical part of that is [when] you’ve got a large percentage of your population who are staying but who may not necessarily be as committed [to] their role. This is actually a very dangerous thing for firms. You’ve got a lot of advisors who maybe feel stuck or just don’t feel inspired. That could be a real issue for the underlying business, because they’re not hungry to do more and to grow and expand.”
In addition to apathetic advisors with one foot out the door, the advisor population is aging out.
J.D. Power found that with an average age of 56 for financial advisors, 20 percent of advisors indicated that they are five years or less away from retirement. Additionally, research firm Cerulli Associates has said that over the next 10 years, about 36 percent of the total industry headcount, or 106,264 advisors, plan to retire.
Lack of time is also a factor. Nearly one-third (28 percent) of financial advisors said that they don’t have enough time to spend with clients. Forty-one percent of those said they spend more time each month than their peers on non-value-added tasks, such as compliance and administrative duties. Advisors who complained about not having enough time had net promoter scores nearly 30 points lower than those who felt that they had sufficient time to spend with their clients.
“Anything that gets in the way of being able to spend more time with clients is a really big negative for advisors, because if clients are unhappy, then advisors are unhappy and that’s likely to drive them to look elsewhere [for work],” said Martin.
In April, J.D. Power reported that investor satisfaction with advisors had plunged more than 17 points year-over-year. Time and client support is a key contributor to comprehensive advice, said Martin. “That’s the ideal. That’s what every advisor wants, because that delivers very loyal clients and builds a growth business. If they don’t have time to spend with clients because there are a lot of administrative tasks, or if there are a lot of clients [for whom] the technology doesn’t work right, [that’s] a negative,” he said.
Martin said that firms need to take a hard look at these factors. With nearly 75 percent of rookie advisors failing or washing out, according to figures from Cerulli, firms that want to retain their advisors need to provide more support and to listen to what their advisors are saying.
Among employee advisors who are most likely to stay with their firm for the long term, a strong culture and company leadership were the top reasons given in the report. Professional development support and training, along with technology, were other key factors influencing advisor retention.