Why firms must invest in their rookie advisors’ success

investmentnews.com:

As a significant portion of today’s advisors are set to grey out of the industry, a new report by Cerulli underscores the pressing need for wealth firms to help their rookie advisors succeed.

According to the newly released US Advisor edition of the Cerulli Edge, roughly two-fifths (38 percent) of industry advisors are expected to retire within the next decade, creating added pressure to develop rookie advisors who can take over existing client relationships smoothly.

But the industry faces a substantial hurdle: the high attrition rates among new entrants. As Cerulli sees it, advisor boot camp isn’t exactly a walk in the park, with more than 75 percent of trainees unable to see their initiation to the end.

“Given the negative impact that a decline in advisor headcount can have on organic firm growth, recruiting rookie talent and enabling them to succeed should be top of mind for wealth management executives, if it isn’t already,” the report states.

For new advisors, one of the toughest challenges is building up an initial base of clients. Half of rookie advisors – who are 37 years old on average, based on Cerulli’s methodology – break into the industry without any clients whatsoever.

Meanwhile, established advisors, many with decades of industry experience behind them, have built up fast-running flywheels of organic growth through a system of referrals, with 56 percent coming from friends, family, and existing clients, and another 15 percent from centers of influence such as CPAs and attorneys.

Not surprisingly, client acquisition stands out as the top obstacle for new advisors, with 44 percent saying it’s a major challenge. And while old-school advisors were able to get started by cold calling, that door has been