CHICAGO If you've ever thought about getting some professional help with your retirement plan, this would be a great time to get going. Financial advisers may be in short supply in the years ahead.
A brain drain is about to hit the world of financial planning, according to Cerulli Associates, a financial services consulting firm. Cerulli reports that 32 percent of all advisers will retire in the next 10 years. At the same time, the industry isn't hiring nearly enough new blood to replace them, let alone expand the ranks to handle the anticipated surge in demand.
The U.S. Bureau of Labor Statistics projects that the number of job openings for financial advisers will jump 27 percent, or 60,300 additional jobs, by 2022. That's much faster than the 10.8 percent average growth rate for all occupations.
The adviser shortage will pose challenges for baby boomers getting close to retirement age who may be just waking up to the need for a plan. But it also should worry anyone working with a planner closing in on retirement who lacks a succession plan, says Scott Smith, a Cerulli Associates director.
"You should be saying - 'I'm 60, you're 60 - who will be here to service my account when I'm older?' These advisers think they can keep working forever, but they don't always retire on schedule - bad things can happen, and then the client is left rudderless. People need to be asking their advisers - what is your contingency plan, and why don't you have a 24-year-old helping you out in the office?"
The retirement wave comes after a period of rapid change in the advisory business. Roughly 85 percent of the business is concentrated at large broker-dealer firms such as Ameriprise Financial, Morgan Stanley and Raymond James. Smith says those firms cut back on new adviser development to save money after the 2008-2009 financial crash. Since then, many have relied on recruiting experienced advisers from other firms.
"A lot of the big firms had big recruiting programs until that point, where they'd bring in a couple thousand candidates in hopes of retaining 200," he says. "Now, they just recruit people from other firms instead of training their own - it's easier and more productive. They're all kicking the can down the road in terms of who will develop the next generation of advisers."
The sales-oriented, commission-driven culture of the big firms is another recruitment barrier, he says. "You're asking a 26-year-old to take his parents' phone book and convince all their friends to hand over substantial sums of money. Young people have a greater interest in being more holistic planners, and less transactional."
Holistic planning addresses not only investments, but the bigger picture, including housing, insurance, taxes, debt and estate planning. It's the province of registered investment advisers (RIAs), many of whom work on a fee-only basis. But RIAs are fewer in number, and they tend to work with high-net-worth clients.
At a time when retirement security has eroded, a plan for retirement has never been more important - especially for households facing deficits in retirement savings, sharp declines in the value of their homes and unforeseen loss of income because of job loss.
Do-it-yourself planning is an option, but a little help from a professional - especially a fee-only RIA - can be worth the time and money. The rationale for hiring an adviser is simple: Money spent now could make a big difference down the road.
About a third (32 percent) of all households have relationships with a financial adviser, Cerulli data shows. But the numbers are higher among people close to retirement and current retirees. Among households in their 60s, for example, 44 percent use planners.
"People usually start thinking about making a plan when they're within 10 years of retirement," Smith says. "Before they turn 50, most individuals don't have enough money to warrant the interest of an adviser, or it's all still sitting inside a 40(k) plan."
Many advisory firms target clients with at least $250,000 in investable assets, and wealth management firms are looking for at least $500,000, Smith says.
But a host of new technology-driven advisory services are targeting middle-income households, and are finding ways to reach households that need financial guidance. Online services such as Jemstep and Future Advisor spit out automated recommendations using algorithms. Others, like LearnVest or Flat Fee Portfolios, use the Web to connect clients with a human adviser.
Meanwhile, a growing number of 401(k) plan sponsors are bolting on low-cost financial guidance from third-party services such as Financial Engines and GuidedChoice.
The adviser shortage points to an area of opportunity for young people and midlife career changers. The Certified Financial Planner Board of Standards (CFP Board), which grants the CFP certification, is working with colleges and universities to develop and operate CFP training programs, and 360 institutions are participating, a figure that has jumped 30 percent over the past four years.
The CFP Board evaluates and oversees the programs; students who complete the program receive a certificate or degree but still must pass the CFP exam and meet other requirements before being certified as a CFP.
"The large firms are realizing that the average age of their people is in the upper fifties, so they need to look at new ways of recruiting," says Charles R. Chaffin, director of academic programs and initiatives at the CFP Board.
If you have a knack for numbers and good people skills, you may be interested in the information about education programs on the CFP Board website: bit.ly/1e7G9T8.
(The opinions expressed here are those of the author, a columnist for Reuters.)
(Editing by Douglas Royalty)