Amid an aging, retiring advisorforce and scarcity of new advisors, broker/dealers and independent firms are struggling to attract enough new advisor talent to adequately replenish their existing advisorforces. Through a commitment to diversity and inclusion, firms can reverse this trend and change the makeup of an industry that currently remains largely homogeneous.

Cerulli estimates that greater than 111,500 advisors will retire in the next decade, representing more than one-third of industry advisor headcount and assets. Among those advisors retiring in the next 10 years, 22% are unsure of their succession plan.

According to Marina Shtyrkov, “In order to broaden their addressable market for new advisors and mitigate succession concerns, firms will need to revamp recruiting and training programs and intentionally prioritize retention—removing barriers that disproportionately affect diverse candidates.”

Although the industry is increasingly moving toward comprehensive financial planning, it still carries a reputation for having a heavy sales focus and compensating advisors based primarily on production/revenue, a deterrent to many candidates. To increase awareness, combat misconceptions, and promote this career path, some broker/dealers are partnering with non-profits, schools/universities, and industry organizations to spread the message (e.g., financial literacy programs, professional women’s networks).

Once candidates become advisors, rookies are often expected to harvest leads from their own network to build a client base, which proves disadvantageous to those from less affluent socioeconomic backgrounds. In addition, inadequate mentoring, exclusive or unwelcoming firm cultures, limited training support, inconsistent/ variable compensation, and numerous other factors drive the high failure rate for all rookie advisors and often disproportionately impact diverse rookies.

While some firms are very publicly striving for increased gender parity, it has been difficult to move the needle, and diversity rates remain staggeringly low. “Changing human behavior and biases is a tremendous undertaking; it has taken decades to develop current perceptions and behaviors, and it may take decades to unwind them,” explains Shtyrkov. “In order to create meaningful, lasting change, firms must be willing to make significant modifications to compensation, recruiting strategies, training programs, and leadership.”

Although diversity has become a common topic of discussion, firms will be pushed to prove their commitment. To enact meaningful change, firms will need to collaborate, rather than compete, on diversity and inclusion efforts. Although change of this magnitude will be gradual, Cerulli asserts that a unified movement—driven by organizations that can bring together firms to develop cohesive strategies, engage in advocacy, and test ideas—will accelerate the pace of change.

The first quarter 2020 issue of The Cerulli Edge—U.S. Advisor Edition presents the key developments that Cerulli’s wealth management research team will explore in 2020 with the goal of offering actionable recommendations for industry decision-makers.