Experienced Financial Advisors Wanted
The current economic crisis has resulted in a decrease in assets under management and a decline in revenue for financial planning and advice firms. The crisis has also resulted in a decline of new potential revenue inflows into funds under advice due to an estimated decrease in discretionary income.
Since industry profitability and financial advisor productivity (due to spending more time reassuring clients) are expected to decline, experienced financial advisors currently are in very high demand.
There is high demand for experience financial advisors since they have higher assets under management, higher productivity, and significantly lower training costs. They also are more likely to receive new business from new clients interested in better asset management and from baby boomers interested in estate planning and retirement services.
Most importantly, experienced financial advisors generate large amounts of revenue from well established client bases by providing complex services to both high net worth and corporate clients - market segments that generate over 57% of the US financial planning and advice revenue.
A shortage of seasoned financial advisors exists although financial planning and advice industry’s employment has been growing. Industry recruitment cut backs in early 2000 and retirement are factors that have contributed to the shortage.
Likewise, instead of hiring and training more inexperienced advisors with lower assets under management and fewer clients, firms within this industry decided that it was more attractive to acquire advisors through acquisitions; contributing to the consolidation that has been taking place in the financial planning and advice industry.
Recently the addition of online access to advisory services, call centers, and teams (groups of advisors serving clients) has also occurred to decrease costs via greater economies of scale as a result of consolidation.
Since the fortunes of this industry are tied to the wealth of the population (which is expected to take time to recover), what else can firms do to control costs and overcome a shortage of experienced financial advisors during this period of declining revenue?
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