— In the wealth management world where financial
advisers are responsible for handling trillions of
dollars in client assets, a significant number of
industry veterans are either near or beyond retirement
could spell trouble for some firms that have no plans
for passing the torch to a younger generation.
average age of financial advisers is 50.9 years old and
43 percent of all advisers in the U.S. are over the age
of 55, according to Cerulli, a Boston-based research
company that focuses on adviser trends and consumer
information. Cerulli found nearly one-third of advisers
fall into the 55 to 64 range.
an under-the-radar issue," said Andrew Stoltmann, a
Chicago-based securities lawyer. "We always talk
about investors getting older. The flip side is advisers
are aging as well, and that’s problematic for
the industry as a whole is faced with this looming
quandary, sole practitioners and smaller firms that lack
the resources to recruit and train young people are most
vulnerable to leaving their client’s assets in limbo
or becoming extinct.
chairwoman and CEO of Hefren-Tilliotson, one of the
largest wealth management firms in the Pittsburgh region
with nearly $10 billion in assets under management,
Kimberly Tillotson Fleming saw the demographics of the
region trending younger and decided some years ago to
work to diversify her team of advisers to serve a
— thanks to a summer internship program and new hire
training — 70 percent of Hefren-Tillotson’s 75
full-time advisers are under the age of 50 and 38
percent under age 40. Fleming hopes that puts her firm
on solid ground to grow a client base when other firms
has a system that encourages teamwork on client
portfolios. New hires typically work three to five years
as financial planners on a team, gaining knowledge
analyzing estate plans, taxes, insurance, investments,
retirement planning and college funding. After gaining
expertise and earning the proper securities licenses,
they move up to a financial adviser role.
thinks clients like it because they worry about the
future. "As you get older, clients will say, ‘Well,
what happens if something happens to you?’ So they
like the fact that there is someone older and someone
younger working with them."
her late father suddenly passed away five years ago,
Fleming, 57, was a member of his team. Because of that
arrangement, the clients he worked with already knew her
and were comfortable continuing the relationship. Now
her son, Grant Fleming, 27, works on her team.
can bring him in and say, ‘Grant will be here to work
with you if something happens to me. And he’s here to
work with your children, too,’" she said.
solution that some small independent financial advisers
have found to succession challenges is to sell the
Fragasso, chairman and CEO of Fragasso Financial
Advisors in downtown Pittsburgh, has been taking
advantage of opportunities to buy small advisory firms.
In November 2015, he purchased Grandview Investment
Management, based outside Pittsburgh.
seller) could retire, but wanted to keep servicing her
clients," Fragasso said. "And she didn’t
have the will or energy to do all the other duties
necessary to manage the business. She also realized her
clients were looking at her asking, ‘Where is the
continues to work for us, but we merged her business
into ours when we bought it," he said, adding that
he also is in discussions with other sole practitioners
in the region.
started his firm as a sole practitioner 44 years ago. It
has grown to 45 employees, including 15 advisers and
nine portfolio managers with $1.1 billion in assets
lieu of selling to a larger company, Fragasso said the
only other option for the owners of small adviser
practices is often to sell to a junior member of the
firm. That may mean working with a buyer who will be
making multiple installment payments. It can be a risky
choice because "the seller doesn’t want to stand
by the mailbox every month wondering if the payment
check will arrive," he said.
said hiring and training a younger workforce not only
guarantees her firm’s continuation, but the new
employees also bring a different perspective on what
Hefren-Tillotson’s service might look like for the
are really helpful in us having the right vision for the
future on how we need to keep adapting, such as being
able to provide certain tools and information to clients
in different ways through the use of technology,"
think what that might mean is we’ll have more Face
Time and more Skyping meetings with clients," she
said, referring to the video chat services. "It
means having information that we can share online when
we are having meetings. I just think that the world is
changing and young people are helping to change it.
of us are slower to make forward-thinking changes, such
as mobile banking. But we have to watch how young people
do it. They are very different. So we want to make sure
we are really adapting to what their needs will