Financial advisors are leaving the industry for all sorts of reasons, but in most cases, the root cause can be traced to the same origin: failed training programs. The result is that many advisors struggle to build an enduring practice.
72% SAID THE ADVISOR FAILED TO COMMUNICATE WITH THEM.
Great news — The number one reason clients fire their advisor is the simplest one to address. Imagine a client engagement process where communication is a two-way street.
According to the survey, which took responses from 4,072 employee and independent financial advisors from January through May 2024, 34 percent of employee advisors and 41 percent of independent advisors who are more than two years from retirement may leave their current firms within the next one to two years.
Advisors may quit if they feel that they've been wedged into a role that doesn't fit their skills, or that their firm doesn't encourage them to acquire new skills. It's frustrating, and once frustration sets in, it can be difficult to feel as if you're able to move ahead.
According to a recent study from Deloitte, 77% of professionals shared that they've experienced burnout. The financial advisory profession isn't any different from these general trends. In one study from the Financial Planning Association, 71% of advisors reported being stressed out.
The Bottom Line. As a financial advisor, it takes hard work to attract clients and even more work to keep them. Clients can part ways with their advisors due to poor communication, mismatched expectations, underperformance, lack of personalized advice, trust issues, high fees, and inadequate financial education.
The drawbacks include high stress, the hard work needed to build a clientele, and the ongoing need to follow regulations. This is a lucrative career, but it's one with a high burnout rate.
Vast majority of wealthy individuals have a financial advisor, with two thirds saying they need more than one to manage their affairs. A recent study from Bank of America Private Bank reveals a strong majority of the country's richest individuals have a financial advisor – and most even have a team in their corner.
How long do clients stay with a financial advisor? The client churn for financial advisors is notoriously high. The average client lifespan for a financial advisor is between three and five years, with 45% of clients leaving in the first two years.
While firing an advisor is rare, many of the primary drivers behind firing decisions are also emotionally driven. Often, advisors were fired due to the quality of the relationship. In many cases, this was due to an advisor not dedicating enough time to fully grasp their personal financial goals.
1. Poor Customer Service. The main reason for losing customers is often poor customer service. Customers feel more valued and satisfied when businesses fail to provide satisfactory support and assistance.
According to the Bureau of Labor Statistics, the financial advisor industry is expected to grow by 17% through 2033. However, even with this expected growth, change is likely in 2025 and beyond.
Being a financial advisor can be highly stressful due to the responsibility of managing clients' financial futures, market volatility, and the need to make crucial decisions under pressure. Stress levels can vary based on individual clients and market conditions.
This means that even if your advisor retires, quits, moves overseas, or dies, your money will still be yours. You just want to know that if your advisor is gone, you'll have a good substitute who'll “come off the bench” and manage your money.
A lot of failure within the financial advisor industry comes down to either not knowing or not practicing the fundamentals. For example, every financial advisor should prospect and follow up - that's a fundamental thing. However, when advisors don't prospect, they put themselves in danger of failing.
Commissions. In this type of fee arrangement, a financial advisor makes their money from commissions. Advisors earn these fees when they recommend and sell specific financial products, such as mutual funds or annuities, to a client. These are often payable in addition to the above client fees.
Most personal financial advisors work full time, and some work more than 40 hours per week. They also may go to meetings on evenings and weekends to meet with existing clients or to try to bring in new ones.
The financial advisory industry is not dying — in fact, it's becoming more important than ever. With the rising aging population and the advancement of technology, financial advisors are playing significant roles in Americans' financial futures.
Research shows that the top reasons people fire their financial advisor are the quality of the advice and services provided, the quality of the relationship and the value of working with that advisor relative to the cost. Many people hire a financial advisor because they want an expert in their corner.
While a 1% annual fee may seem like a small price to pay for professional investment guidance and financial planning, it can significantly erode portfolio returns over long time horizons. Even seemingly minor differences in fees add up in a big way when compounded year after year for decades.
According to the U.S. Bureau of Labor Statistics, the median annual wage for personal financial advisors was $94,170 in May 2021. It means half of the financial advisors earned more than that, and half earned less. One in ten earned less than $47,570, while one in ten made more than $208,000.
The financial services industry is facing a critical challenge: a talent shortage. As the average age of financial advisors has reached 57, firms must urgently focus on attracting and training young talent to ensure sustainability.