The decline in the ranks of financial advisers in the United States is likely to accelerate in the next decade, as a many brokers reach retirement age.
The number of financial advisers fell to 310,000 at the end of 2008 from 314,000 in 2004, Boston-based consulting firm Cerulli Associates said in a study released on Wednesday.
Given that the average adviser is around 49 years old and that 14 percent of U.S. advisers are over 60, large brokerage firms such as Morgan Stanley Smith Barney and Bank of America Corp's Merrill Lynch will face a serious challenge finding replacements.
"As the Baby Boom advisers retire, the financial advisory industry runs the risk of not being able to meet" the demand of American investors, Cerulli analysts wrote.
Typically 10 percent of advisers leave or retire from brokerage firms each year, a fact of life that puts big firms on a fast moving treadmill.
Wells Fargo & Co., which had 21,000 advisers across its various wealth businesses last year, would need to hire more than 2,000 new people a year just to stand still, Cerulli said.
The study also found that 13 percent of U.S. retail advisers changed firms last year, part of an unprecedented recruiting war that drove up compensation costs.
In response, many of the larger firms have recently revived adviser-training programs to replenish their ranks, reversing cuts undertaken during the financial crisis and lessening demand on recruiting.
Merrill began efforts earlier this year to bring in 2,000 trainees, while Wells set out to train 400 career-changers.
There is a downside to training: only around a quarter of trainees eventually become successful advisers, New York brokerage recruiter Danny Sarch said.
"There's so little chance that they will be successful," said Sarch. "It's tough. It's very sales oriented, you have to know wealthy people and get them to trust you."
Brokerage firms are trying to fine-tune their training programs to ensure a greater success rate. Instead of relying on new college graduates, firms have focused on professionals looking for a career change, said Cerulli.
Potential targets include people with sales experience, such as pharmaceutical representatives, financially savvy professional such as accountants and "self-motivated" recruits such as military officers and athletes.
Another option is teaming trainees with more experienced advisers to teach them the business. Junior advisers can do mundane tasks and free senior members to prospect for new clients, while possibly grooming someone to take over the business.
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