Jeff Concepcion is CEO and Founder of Stratos Wealth Partners, an SEC Registered Investment Adviser
Instead Of Waiting For A Baby Boom, Advisors Can Use The Tools Currently At Their Disposal To Integrate The Next Gen And Plan For Succession
Declining population
The COVID-19 pandemic ushered in more than dramatic changes in how we work and gather socially – it produced a mini-baby boom. Based on CDC data, the number of births in the United States rose by 1% from 2020 to 2021. That’s a significant shift as birth rates have fallen 20% since 1990.
Still, the 2021 boomlet wasn’t enough to address the waning population. Low birth rates create notable ripples and have the potential to impact long-term national economic growth. If there’s ever been a cautionary tale on the consequence of population decline, it’s Japan.
Assuming similar impacts in the United States, we will have fewer working adults resulting in a smaller population to finance programs like Social Security and Medicare as demand for these programs grow.
And it means a smaller pool of potential financial advisors for an aging population looking for successors, not to mention competition over a smaller group of Next Gen clients.
Succession Squeeze
The impending “Great Wealth Transfer” will see an estimated $73 trillion in assets pass from older generations to younger beneficiaries through 2050. Investors unprepared for this wave of inheritance may seek the expertise of financial advisors more than ever as they seek ways to preserve and grow wealth.
But this transfer isn’t just about monetary assets, it’s about institutional memory and business assets too.
Those born in the early 1990s – the last significant baby boom – need to join this industry to address the expected demand for advisory services. And they need to do so now, to work closely with the most experienced advisors before they retire. Many financial advisors are in their mid-60s, with more over the age of 70 than under the age of 30.
The demand for expertise and a smaller pool of available wealth managers – because of the shrinking population – may overwhelm financial advisors as they attempt to balance asset management with growing their business.
And it can mean advisors will be hard-pressed to find their own successor – 73% of financial advisors lack a succession plan, according to the Financial Planning Association.
Providing Relief
Financial advisors should identify successors and train them to take over the business, but that is just the first step.
Work closely with experienced advisors
Advisors must work with firms that provide meaningful benefits to Next Gen advisors.
Of course, streamlined, succession-based acquisition solutions platforms that make tucking-in easier, programs that give established businesses a way to sustain their brand without having to find a direct successor and financing for those considering taking over a mature book of business will deliver significant value to both those looking to the next stage of their lives and those just getting started.
Helping younger advisors thrive
Yet there need to be cultural shifts within these firms, as well. With an understanding that the needs and expectations of both advisors and clients have changed dramatically – technology and access must be modernized and simplified. Helping younger advisors thrive within the regulatory framework will become critical for practice management experts as the Next Gen builds upon the success of those retiring and modernizes their practice to face a changing marketplace.
The financial services industry faces many challenges in the next decade, among them identifying enough advisors to take over existing practices and managing the growing, complex financial planning needs of an aging population.
But there are ways to make it easier for the industry by creating streamlined succession-based acquisition paths. Firms that offer this approach can appeal to aging advisors, those looking to capitalize on this wave of retirements and individuals seeking advisory services. And while it would be nice to think that the little ones running around will save our industry – we already have the solutions. Now we need to put them into action.
Jeff Concepcion is CEO and Founder of Stratos Wealth Partners, an SEC Registered Investment Adviser